NEW YORK--(BUSINESS WIRE)--Numerous challenges are in store for U.S. local government ratings headed into 2016, though not enough to affect the stable outlook for the sector, according to Fitch Ratings in its 2016 outlook report.
Unrestricted general fund balances have by and large recovered after falling only modestly during the economic downturn. Strong reserve levels will afford a layer of protection should another recession take place, a scenario Fitch does not expect next year. Also coming is implementation of Fitch's revised tax-supported criteria, which will begin in early 2016 and might result in changes to roughly 10% of local government ratings over the course of the year (in line with historical movement).
The continued improvement in the broader housing market will lead to higher assessed values and property tax revenues through fiscal 2017. Other revenues, however, will be less predictable according to Managing Director Amy Laskey. 'Sales and other non-property-tax revenues react more quickly to economic changes and are more difficult to project than property taxes,' said Laskey.
Pension contributions will also continue to grow, albeit at a slower rate than in recent years, with GASB 68 changing reporting standards for public sector pension liabilities. This stands to affect local governments that participate in cost-sharing multi-employer plans most significantly. Local government managers are able to turn their attention to longer-term issues with a more stable environment for near-term operations, which according to Laskey makes infrastructure funding an area of increased focus headed into 2016.
'2016 Outlook: U.S. Local Governments' is available at 'www.fitchratings.com' or by clicking on the above link.
Additional information is available on www.fitchratings.com.
2016 Outlook: U.S. Local Governments (Continued Stability; New Criteria to Provide Enhanced Information, Rating Predictability)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=873942
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