Fitch: Eminent Domain Restrictions Affect on Muni Credit Quality.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- A new Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. special report 'Beyond Kelo: Reactions, Responses and Credit Quality' has just been released. The report discusses possible credit implications of efforts to limit eminent domain eminent domain, the right of a government to force the owner of private property sell it if it is needed for a public use. The right is based on the doctrine that a sovereign state has dominion over all lands and buildings within its borders, which has its origins in powers that have followed the U.S. Supreme Court ruling in Susette Kelo et al, v. City of New London New London, city (1990 pop. 24,540), New London co., SE Conn., on the Thames River near its mouth on Long Island Sound; laid out 1646 by John Winthrop, inc. 1784. , CT, et al. The June, 2005 ruling, affirmed a government's ability to obtain property through eminent domain for economic development, causing strong reactions, both critical and supporting. Fitch believes if eminent domain powers are restricted to a significant degree, municipal credit quality could be restrained or negatively affected. However, in the near-term, Fitch does not expect rating downgrades as a result of the legislation restricting the use of eminent domain in most situations. "By impairing a state or local government's efforts towards economic development, such legislation, if enacted, may limit opportunities for credit quality improvement and rating upgrades," explained Amy Doppelt, Managing Director and co-head Public Finance Tax-Supported Debt. "Restrictive legislation has the potential to contribute to a diminution Taking away; reduction; lessening; incompleteness. The term diminution is used in law to signify that a record submitted by an inferior court to a superior court for review is not complete or not fully certified. of credit quality over a longer term, in that, the proposed laws limit a state or local government's ability to respond to economic blight or weakened conditions," Doppelt said. The report notes the impact of restrictive legislation mostly will affect development-reliant credit types, such as tax allocation bonds, special assessment debt and obligations structured by state-specific structures such as Mello-Roos debt in California and Municipal Utility Districts in Texas. However, the longer-term affect of limiting economic development efforts could impact both development-related debt and broader-based securities issued by the municipality, such as general obligation bonds, lease obligations, and utility revenue bonds Utility revenue bond A municipal bond issued to finance the construction of public utility services. These bonds are repaid from the operating revenues the project produces after the utility is finished. . The report provides background on the U.S. Supreme Court ruling and municipal use of eminent domain; information on federal and state reactions and responses to the decision; and outlines the rating implications of the eminent domain restrictions under consideration. The report is available through Fitch Research on the Fitch Ratings web site at www.fitchratings.com. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
|
||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion