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Tax-Secured Debt Rating Outlooks On Local Governments Revised To Negative Due To COVID-19, Recessionary Pressures


Tax-Secured Debt Rating Outlooks On Local Governments Revised To Negative Due To COVID-19, Recessionary Pressures

(Editor's Note: We are republishing this report to remove Plano, Ill. from the list of affected credits. Our original report incorrectly included Plano even though all of its outstanding debt had been redeemed prior to the report\rquote s publication date.)

CHICAGO (S&P Global Ratings) May 21, 2020--S&P Global Ratings revised the outlook to negative from stable and affirmed its long-term and underlying ratings on a number of local governments with outstanding tax-secured debt due to heightened risks caused by the COVID-19 and the related recession.

"The outlook revisions reflect our view that there is at least a one-in-three chance of a lower general obligation (GO) bond rating for each of the local governments listed below within a time frame of up to two years, given the challenges we expect these governments to face both in the near term as the result the COVID-19 pandemic and related social distancing measures and over the medium term as a consequence of the economic fallout from the current recession," said S&P Global Ratings credit analyst Scott Nees.

As we described in our most recent U.S. economic forecast, "An Already Historic U.S. Downturn Now Looks Even Worse" (published April 16, 2020, on RatingsDirect), the current recession has reduced economic activity by roughly three times the decline seen during the Great Recession and in one-third of the time, and we expect U.S. GDP to contract by 5.2% in 2020. We further highlighted that headline unemployment could reach levels much closer to the Depression-era peak of 25% than to the 10% high during the last recession (see also "U.S. Biweekly Economic Roundup: With Unprecedented Job Losses, Unemployment Soars," published May 8, 2020). This forecast also came on the heels of a revision of the sector outlook for all of U.S. public finance (including local governments) to negative, reflecting our view that the remainder of 2020 is likely to see more negative than positive rating actions across all U.S. public finance sectors nationally (see "All U.S. Public Finances Sector Outlooks Are Now Negative," published April 1, 2020).

Against this backdrop, we expect that many local governments will experience heightened pressure on revenues as the result of COVID-19 and related social distancing measures taken to slow the spread of the disease. We consider such measures taken to protect the health and safety of the public a form of social risk under our environmental, social, and governance (ESG) factors.

In particular, we expect that governments with heavy reliance on more economically sensitive revenue streams such as hospitality, income, and sales taxes will be at greater risk of near-term credit deterioration, as will those with weaker budgetary reserves and liquidity. We further expect that the recession could continue to create fiscal hardship for governments even after the immediate crisis has passed, as factors such as lingering high unemployment could continue to have downstream economic effects that hamper local government revenue performance and pressure credit quality well beyond the current fiscal year.

The governments listed below have been selected for credit-specific reasons as being at risk of a lower rating within the next one-to-two years, if not earlier. We will continue to monitor how the COVID-19 pandemic and recession affect key rating factors--such as budgetary performance, reserves and liquidity, and the local economy--and could take negative rating actions should we see pressures emerge that we think mark a significant enough change to warrant a lower rating.

Local Government Ratings On Negative Outlook
Local government State Rating

Anaheim

CA AA-/Negative

Ashford

AL BBB-/Negative

Bellefontaine Neighbors

MO A/Negative

Bolivar

MO A/Negative

Branson

MO A/Negative

Brewster Village

NY A+/Negative

Calumet City

IL BBB+/Negative

Carthage

IL A+/Negative

Centralia

IL A-/Negative

Derry Township (Westmoreland County)

PA A/Negative

Dwight Village

IL A/Negative

Fairvew Heights

IL AA/Negative

Hanover Village

IL A+/Negative

Hillsboro

IL A/Negative

Hollister

MO BBB+/Negative

Jerseyville

IL A/Negative

Lanett

AL A-/Negative

Lyons Village

IL A/Negative

Mammoth Lakes

CA A+/Negative

Marshall

IL A+/Negative

Mechanicsburg Village

IL A-/Negative

Monticello

IL AA-/Negative

North Las Vegas

NV A/Negative

Northvale Borough

NJ AA/Negative

Oakfield

NY A/Negative

Princeton

IL A/Negative

Pulaski County

KY A/Negative

Savannah

MO A+/Negative

Schaumburg Village

IL AAA/Negative

Slocomb

AL A/Negative

Sylvan Springs

AL A/Negative

Thrall

TX A-/Negative

Tilton Village (Vermilion County)

IL A-/Negative

Two Rivers

WI BBB/Negative

Westchester Village

IL A-/Negative

White Hall

IL A-/Negative

RELATED RESEARCH

Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for further information. Complete ratings information is available to subscribers of RatingsDirect at www.capitaliq.com. All ratings affected by this rating action can be found on S&P Global Ratings' public website at www.standardandpoors.com. Use the Ratings search box located in the left column.

Primary Credit Analyst:Scott Nees, Chicago (1) 312-233-7064;
scott.nees@spglobal.com
Secondary Contact:Joshua Travis, Farmers Branch 972-367-3340;
joshua.travis@spglobal.com

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