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US Public Power Criteria Revision

Fitch Ratings finalized its new criteria for U.S. public power systems, the changes of which are detailed in a new report and companion piece. These revisions will facilitate a more forward-looking, predictable approach to ratings and better highlight differences among credits in the same category.


Exposure Draft Public Power Rating Criteria

Thursday, June 28, 2018 -- 11:00am EDT

Please join Fitch Ratings on a teleconference to discuss the planned changes to the rating criteria for Public Power bonds.

Speaker:  Dennis Pidherny - Senior Director, Group Head, Public Power

Register Now



Path to Impactful U.S. Public Pension Reforms Paved by Court Decisions

The legal backdrop for U.S. state and local pensions has played a key role in reforms adopted by some states in 2018, although pensions in general still face an uphill climb to improve their funding levels, according to Fitch Ratings.

U.S. State Ratings Largely Stable as New Budget Year Begins

Forty-six states begin a new fiscal year on July 1, and the vast majority will do so with a Stable rating outlook. The majority of Fitch's U.S. state rating outlooks are Stable and expected to remain so. 

State and Local Governments Feel Pinch of Budget Pressure

Laura Porter, Managing Director at Fitch Ratings, talks about her firm's report on budget pressure on state and local governments. She speaks in this week's Muni Moment with Bloomberg's Taylor Riggs on Bloomberg Markets. RelatedUS State Spending Pressure Will Rise on Higher Healthcare

US State Spending Pressure Will Rise on Higher Healthcare

Rising healthcare costs and retirement rates will increase budgetary pressure on US state and local governments. Our scenario analysis would see the share of state and local budgets that are allocated to healthcare and pensions rise by 800bps by 2025.

Water Conservation Regulations Not Likely to Affect California Utilities

Legislation establishing state-wide water conservation standards is not likely to affect ratings for California water utilities, according to Fitch Ratings. That said, rate affordability could become an issue over time.

Natural Disaster Risk Varies for U.S. State & Local Government Ratings

Natural disasters have become increasingly acute and chronic, which is presenting operational and financial challenges to some U.S. state and local governments, according to Fitch Ratings. The rating agency considers environmental factors in its U.S. public finance credit ratings through the lens of fundamental credit risk, as detailed in a new report.

Teleconference: Fitch Rates LINXS APM Project

Fitch Ratings hosted a call with investors to discuss its recent ‘BBB+ (EXP)’ of the California Municipal Finance Authority's (CMFA) approximately $1.2 billion senior lien revenue bonds.  The proceeds of which will be used by the borrower (LAX Integrated Express Solutions, LLC (LINXS)) to construct an automated people mover at Los Angeles International Airport.

SCOTUS Janus Ruling Impact Limited for State and Local Governments

A potentially landmark Supreme Court ruling concerning public school teachers and right-to-work laws is not likely to have a meaningful effect on state and local government finances, according to Fitch Ratings in a new report.

Hawaii Credits Unaffected as Volcano Continues

Based on Fitch Ratings' review of initial reports and damage assessments, rating changes are unlikely for Hawaii's U.S. public finance, port and airport credits following ongoing volcanic activity on Hawaii Island. Fitch does expect the state's tourism-driven economy to feel some adverse peripheral effects from the volcanic activity in the short term, but ultimately the fiscal impact of the eruption on rated entities in Hawaii will be largely mitigated by Hawaii's financial flexibility, support from federal and state governments, and private insurance policies.

Build IL Downgrade Contrasts State/Local Dedicated Tax Approach

The Build Illinois downgrade highlights Fitch Ratings' credit view that the framework for rating U.S. state dedicated tax bonds must differ from that for rating local government dedicated tax bonds because local government security structures fall under Chapter 9 of the U.S. Bankruptcy Code. In contrast, there is no bankruptcy framework for U.S. states, which means that evaluating the prospects for varying state security structures at a time of fiscal distress is by necessity somewhat judgemental.

Fitch Downgrades Illinois' $2.5B Build Illinois Bonds to 'A-'; Outlook Negative

Fitch Ratings has downgraded and removed from rating watch negative the ratings on the following Build Illinois sales tax revenue bonds of the state of Illinois to 'A-' from 'AA+':

  • $1.41 billion senior obligation bonds;
  • $1.08 billion junior obligation bonds.

Fitch placed the bonds on Rating Watch Negative on April 4 following release of its revised criteria for rating U.S. state dedicated tax bonds.

Budget Impact of Marijuana Legalization Modest for NYC

The potential budgetary impact of legalizing marijuana for recreational use in New York State would be modest for New York City with no impact on credit quality, according to Fitch Ratings. Fitch expects the decision to legalize in New York State, which as a whole would also see modest revenue gains, will be based on political and public policy considerations rather than budgetary ones.

California Solar Rule Neutral for Resi, Power Issuers

We do not expect the building requirement to have a material effect on public power issuer ratings. The requirements are consistent with the ongoing trend toward greater energy efficiency and reduced per capita electricity consumption in the state. Public power utilities have been planning for, and adapting their long-term supply strategies to, responding to this trend. 

Seattle's Head Tax Unlikely to Affect Credit

Seattle's city council unanimously adopted a measure to impose a $275 per employee tax on companies that gross over $20 million annually. The city estimates it will generate roughly $47 million per year to address homelessness and housing affordability issues though its ultimate use will be determined along with the 2019 budget.

Fitch's Tolerance for US NFP Hospitals to Stay Viable and Profitable: Five Years

Capital projects are an inevitability in order for US not-for-profit hospitals to stay viable and so are the disruptions to profitability that arise from seeing those projects to fruition.


Taking those two commonalities into account, a question Fitch frequently receives from investors is "How long will you be patient with the rating before you see our improved results?" Fitch's answer: an uncharacteristically direct "five years". More specifically, Fitch's five-year scenario analysis, which offers a look ahead into a hospital's ability (or inability) to maintain its rating through a cycle.

Limited State, Casino Impact From US Sport Betting Ruling

The US Supreme Court's decision to strike down a federal law banning states from permitting gambling on the outcome of sporting events will lead to an increase in the number of states permitting sports betting. However, those revenues will only have a small impact on overall gaming revenue and is unlikely to have a material adverse impact on Las Vegas' sports betting activity.

Illinois Securitization Structures Not Subject to State Revenue Diversion

Tax revenues sold to corporations such as Chicago's Sales Tax Securitization Corp. are not at risk of diversion under the Illinois Pension Code. Under a 2017 revision to the Illinois Municipal Code, home rule municipalities can sell revenues or taxes received from the state to not-for-profit corporations that serve as financing vehicles.

Kentucky Wired Wins Commonwealth Approvals; Funding Hurdle Remains

Although the Kentucky Wired PPP project has won legislative and gubernatorial support for appropriations and bonding authority, securing funding for an $88 million commonwealth commitment to resolve outstanding project issues remains a key financial hurdle.

US Pension Contributions Trending Higher but Pace Slowing

Actuarial pension contributions of state and local governments are and will continue to grow over time, though the pace has slowed following the rapid increases that took place immediately after the Great Recession.

Amazon HQ2 May Have Some Long-Term Credit Impact

The location of Amazon's second headquarters (HQ2) will not have a near-term impact on local government ratings or the housing market around the eventual winner. The jobs brought by HQ2 will only affect the local governments that can capture the attendant property, sales and income taxes.

Credit Hotspot: Trade Protectionism

US-China Tariffs Could Hurt Some US States In Midterm

free research sample

Tax Reform Raises Questions for Most US States' Revenues

"While most of the ripple effect will play out over time, provisions including the cap on SALT deductions are a likely trigger behind a spike in state revenue collections for the current fiscal year," said Director Eric Kim.

California Water Capital Spending to Rise as Operating Risks Mount

Capital spending at California water and sewer utilities is likely to increase to address water supply reliability and regulatory requirements. Capital investment is needed for infrastructure maintenance, water supply reliability, and new supply development.

HB 1539 Neutral to Northern Virginia Transportation Authority's Credit Quality

A proposal to repeal a portion of the revenues pledged to outstanding transportation special tax revenue bonds issued by the Northern Virginia Transportation Authority will not have an impact on its 'AA+' rated debt.

Upgrades Outpacing Downgrades So Far for US Not-For-Profit Hospitals

Affirmations, not surprisingly, are encompassing a majority of rating actions we have taken on our rated US not-for-profit hospitals since launching our new criteria earlier this year, though our new report is showing another somewhat surprising result.

Supreme Court Reversal May Be Good News for Some US Governments

The US Supreme Court will soon review a South Dakota internet sales tax law that challenges a 1992 court precedent limiting the ability of states to collect taxes on out-of-state purchases. 

Potential NAFTA End Pivotal for US Midwest and Border States

"Withdrawal from NAFTA would cut economic and job growth along with tax revenue, constrain budgetary flexibility and lead to higher unemployment for states that are less populous and economically diverse, specifically states in the upper Midwest and Southwest border-states," said Michael D'Arcy, Director, Fitch Ratings.

Revised US Public Finance Tax-Supported Rating Criteria

Fitch expects these changes will affect fewer than 10 ratings. Other revisions to the criteria simply clarify certain aspects of our approach for US state and local government credits. Related: US Public Finance Rating Criteria


NAFTA: Trade in the Time of Trump

The smaller economies of the Upper Midwest and the Southwest border states would be the most negatively affected state economies if the US withdraws from the North American Free Trade Agreement (NAFTA), due to the states' high exposure to export trade with Canada and Mexico.


Dan Champeau


Dan Champeau

Analytical Group Head

+1 212 908 9188

Ann Flynn


Ann Flynn

Business Group Head

+1 212 908 9152

Jack Archibald


Jack Archibald

Business - Fees

+1 212 908 0664

Jessalynn Moro


Jessalynn Moro

Head of Public Finance

+1 212 908 0608

Laura Porter

Tax-Supported - States & Locals

Laura Porter

Sector Head

+1 212 908 0575

Dennis Pidherny

Revenue-Supported - Public Power and Water & Sewer

Dennis Pidherny

Managing Director - Public Finance

+1 212 908 0738