Credit ratings of otherwise fiscally-sound municipalities that issue municipal bonds to support economic development projects could be downgraded if the projects fail to meet expectations, according to the Bond Buyer. “Local governments with strong credit fundamentals can suffer when forced to assume the risks associated with third-party economic development ventures," Moody's analysts said in a Sept. 21 commentary, reported in the Bond Buyer. Recent examples include a downgrade of the general obligation bond rating for Port St. Lucie, Florida to A1 from Aa3 after a research institute supported by that city’s debt defaulted on a mortgage payment and announced plans to close; a downgrade for Steel County, Minnesota’s general obligation and bond revenue ratings due to “fiscal strains of enterprise systems and a senior living facility”; and Bristol, Virginia’s general obligation rating drop to Baa2 from A3 after that city doubled its debt to support a 140-acre retail tourism destination project. For more, read the full Bond Buyer article (subscription required).
Risky business: Municipalities downgraded due to failed economic development projects
