Bloomberg News

Municipal Downgrades Top Upgrades in Recession’s Wake, S&P Says

November 02, 2011

Oct. 27 (Bloomberg) -- Downgrades of U.S. municipal ratings exceeded upgrades in the third quarter for the first time since the start of the financial crisis, according to a report by Standard & Poor’s.

The company cut 117 public-finance credits, up from 95 in the second quarter, it said in a report today that cited the “fiscal fallout” from the 18-month recession that ended in June 2009. S&P upgraded 95 credits last quarter, down from 181 in the second quarter. There was one U.S. public-finance default in the July-September period, S&P said.

Among non-housing areas, the majority of downgrades took place among local-government credits tied to appropriations and taxes. Local governments rely on property taxes for funding, and home prices have stalled through the economic downturn.

“It is possible that the total number of downgrades may continue to exceed upgrades through the remainder of the year,” the report said. It cited the tepid economic recovery, potential federal spending cuts and the risks to financial markets from the European debt crisis.

The only areas in which upgrades outpaced downgrades were health care and revenue-secured utilities.

--Editor: Mark Tannenbaum

--Editors: Mark Tannenbaum, Mark Schoifet

--Editors: Mark Tannenbaum, Mark Schoifet

--With assistance from Jeran Wittenstein in San Francisco.

To contact the editors responsible for this story: Mark Tannenbaum at

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