S&P: Impact of August Floods on Credit for Affected Louisiana Parishes Will Differ

September 22, 2016

The 22 Louisiana parishes that were impacted by record flooding in August will experience varying degrees of economic and financial stress, according to S&P Global Ratings.

This is because local governments all have different credit strengths and weaknesses, and the flooding affected many parishes differently.

S&P said that overall, between federal, state and insurance reimbursements, the total costs related to the disaster will likely be fully mitigated. If so, that would be viewed as a credit positive.

However, delays in collecting these funds could spill across several fiscal years and affect near-term budgetary performance and reserve levels. To the extent that local governments have enough liquidity to cover tax-base declines or financial losses, their credit quality will likely not deteriorate, S&P stated.

According to S&P. the Federal Emergency Management Agency will support 75 percent of the disaster recovery costs for the 22 affected parishes, while the state will pick up the remainder. Subsequently, the allocation of recovery aid changed.

The Louisiana governor requested — and was granted — additional federal participation to provide 90 percent of its costs. Considering the change in funding sources, S&P said it views the lower allocation in state assistance as a credit positive for Louisiana’s reserve position and fiscal 2017 budgetary performance.

As to local governments, S&P said it views the change in federal and state funding source allocation as credit neutral. However, delays in reimbursements could have a greater impact on a local government’s budgetary performance should a greater share of its reimbursements come from one entity.

The 22 affected parishes include Acadia, Ascension, Avoyelles, East Baton Rouge, East Feliciana, Evangeline, Iberia, Iberville, Jefferson Davis, Lafayette, Livingston, Pointe Coupee, St. Helena, St. James, St. Landry, St. Martin, St. Tammany, Tangipahoa, Vermillion, Washington, West Baton Rouge and West Feliciana.

Source: S&P Global Ratings

Topics Louisiana Flood

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