Municipal Bonds Have a NEGATIVE Outlook According to Moody’s

The New York Times is reporting that Moody’s Investors Service has assigned a negative outlook to the creditworthiness of all local governments in the United States. Folks, this is first time this has ever happened.

Now what’s that got to do with genealogy? I believe that it may have a lot to do with our access to records – especially records kept on the local level. It’s also going to have an effect on your pocketbook, and mine – leaving us less to spend on our hobby.

With the stock market acting like a yo-yo, investments having been drifting toward Municipal Bonds, which have always been seen as quite secure. Now we hear that those bonds may not be so secure after all. Local governments are not taking in the tax money that they are used to. (Note that Federal Income Tax is now down 25%!). The potential downgrade in the bonds will mean that communities will pay a higher interest rate. That higher interest rate will be paid by you and I. Many, if not most, (how about all?) communities will be forced to do two things:

  • Increase Taxes
  • Reduce Services

Following is a teaser with more bad news from the April 7, 2009 edition of the New York Times:

Moody’s Investors Service assigned a negative outlook to the creditworthiness of all local governments in the United States, the agency said Tuesday, the first time it had ever issued such a blanket report on municipalities.

The report signaled how severely the economic downturn was affecting towns, counties and school districts across the nation.

While Moody’s regularly reports on the financial strength of various sectors of private industry, its analysts have in the past considered America’s tens of thousands of towns and local authorities too diverse for generalizations.

The report suggests that the ratings of many governments could be downgraded in the coming months, something that would make it more expensive for them to borrow money to finance their operations.

In former boom states like California and Florida, the sharp decline in housing prices is translating into falling property-tax revenue, while in towns in Michigan, Indiana and Ohio, revenues are off because of the collapse of the auto industry. Many local governments in New York, New Jersey and Connecticut will lose significant revenue because they rely on the banking and financial services sectors for their tax bases. Moody’s said any municipality relying heavily on tourism, gambling or manufacturing was probably at risk of feeling a pinch.

The report suggested conflicts ahead between taxpayers struggling to keep their own households afloat and elected officials charged with balancing budgets, making their payrolls and protecting their credit ratings.

Read the full article in the April 7, 2009 edition of the New York Times.

About Leland Meitzler

Leland K. Meitzler founded Heritage Quest in 1985, and has worked as Managing Editor of both Heritage Quest Magazine and The Genealogical Helper. He currently operates Family Roots Publishing Company (www.FamilyRootsPublishing.com), writes daily at GenealogyBlog.com, writes the weekly Genealogy Newsline, conducts the annual Salt Lake Christmas Tour to the Family History Library, and speaks nationally, having given over 2000 lectures since 1983.

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