T-SPLOST failures prompt “credit negative” warning from Moody’s

HT to Jim Galloway at the AJC for Moody’s awards metro Atlanta a ‘credit negative’ for TSPLOST failure:

The note that arrived from Moody’s is pretty self-explanatory. The defeat of the transportation sales tax vote in metro Atlanta and eight other regions of the state won’t result in an immediate downgrading of credit – but could result in one when the state or local governments go bond-shopping in the future.

From that memo, as quoted by the AJC:

In our Credit Outlook released today, Moody’s announced that voter rejection of a 1% Special Purpose Local Option Sales Tax (T-SPLOST) in nine of 12 regions of the State of Georgia is a credit negative for those areas…, especially for Atlanta because of the city’s position as an economic hub, which could be hurt by the area’s current condition of infrastructure.

The Atlanta region needs major upgrades to its dated and limited transit system and congested roadways to maintain its long-term position as an influential economic center. The region will now be challenged to fund such projects on a local or state level, as the region had not formulated a specific contingency plan for identified projects if voters rejected the tax.

Conversely, voter approval and adoption of T-SPLOST is a credit positive for the three regions that approved it. These regions will benefit during and after the new sales tax’s 10-year collection period as the proceeds will fund a combined 121 transportation-related projects. These regions are the Central Savannah River, the River Valley District, and The Heart of Georgia District.

Moody’s declaration of “credit positive” or “credit negative” does not connote a ratings change. We are simply stating what the credit impact could be on issuers as a result of this new legislation.

Credit ratings agencies like Moody’s lost a lot of credibility for mistakes in the lead up to the financial crisis, but their ratings certainly matter.

I didn’t anticipate this as a fallout from the T-SPLOST failures, but I’m not surprised.