AUSTIN, Texas--(BUSINESS WIRE)--Link to Fitch Ratings' Report: How Will Local Oil Patch Governments Fare? (Financial and Economic Impacts of Fluctuating Energy Prices)
Local U.S. governments in select oil-producing states face varied economic impacts from the recent decline in oil prices, according to Fitch Ratings in a new report.
Differences in revenue raising capabilities among states like Texas, California, Alaska and Louisiana, along with expenditure flexibility and available reserves, affect the degree to which local governments can respond and what tools they have at their disposal in the process.
'The challenges posed by recent oil price fluctuations reinforce that there is no one-size-fits-all approach to financial and economic recovery for local governments,' said Senior Director Steve Murray.
Local governments with sizable mineral reserves have more exposure to fluctuating oil and gas prices if the minerals are part of the tax base against which property taxes are levied. Local governments in California and Texas may face these challenges more often as minerals are taxed at the local level. Both Alaska and Louisiana tax oil and gas at the state level, excluding minerals from local government property taxes altogether.
Fitch's case studies have identified several local governments within energy states that are moderately vulnerable to a ratings downgrade from an extended downturn in oil prices. These include the cities of Houston and Midland, and Johnson County in Texas; Anchorage and North Slope Borough, Alaska; Terrebonne Parish, Louisiana; Kern Country, California; and others.
Despite potential legal and political constraints, local governments generally have enough tools to respond to energy-related finance pressures, either through spending cuts, increasing revenue sources or utilizing reserves, or some combination of these three.
'How Will Local Oil Patch Governments Fare? Financial and Economic Impacts of Fluctuating Energy Prices' is available at 'www.fitchratings.com' or by clicking on the above link.
Fitch Ratings, Inc., 111 Congress Ave, Ste 2010, Austin, Texas 78701
Additional information is available at 'www.fitchratings.com'.