Moody’s has issued a “Special Comment” about Stockton’s decision to pay less than its full bond debt.
Looking both at Stockton, San Bernadino, Scranton and other broke municipalities, the credit rating/market analyst company says, “These cases raise the question of whether distressed municipalities will begin to view debt service as a discretionary item in their budgets and whether defaults will increase.”
“Moody’s concludes that yes, a few more cities will. But only a few – though, thanks to Stockton, the willingness of financially stressed municipalities to pay bond debt can never again be taken for granted.
“Events of the last few years prompt us to review our long-held assumptions about municipal behaviors and attitudes toward debt repayment,” the report says.
A column on the subject here.