BRADENTON, Fla. – As Louisiana and the 22 parishes impacted by August's severe flooding continue to complete damage estimates, rating agency analysts say the credit impacts will vary depending on their fiscal health.
On Friday, Fitch Ratings said that it does not anticipate that the city of Baton Rouge/Parish of East Baton Rouge Consolidated Government will incur material financial impairment.
The city/parish, home to the state's capital, reported that it lost 90 police cars and three firefighting vehicles, while a library branch, three fire stations and the parish-wide wastewater system sustained some flood damage, said Fitch analyst Steve Murray.
"Officials report no liquidity issues for repair and recovery-related expenses," Murray said. " Fitch has noted previously the city/parish's consistently healthy liquidity as a positive credit consideration."
Fitch, which assigns an AA-plus issuer default rating to the Baton Rouge/East Baton Rouge Parish, said that damage assessments are not yet complete.
According to S&P Global Ratings, the economic and financial impact in the affected parishes will differ with each local government's credit strengths and weaknesses.
The state and parishes affected by the floods, analysts said, will be aided by the federal government's decision earlier this month to increase its reimbursement rate for storm-related expenses to 90% from 75%, reducing their costs for clean-up and recovery efforts.
Gov. John Bel Edwards, who requested the higher reimbursement rate, is waiting to see if Congress includes $500 million for additional flood relief in a continuing resolution that would fund the federal government through Dec. 9.
Congress could vote on the continuing resolution this week.
President Obama had requested a $2.6 billion federal aid package.
Edwards has said that the federal financial assistance is needed for housing, infrastructure and other storm-related programs damaged by the floods, which left 13 people dead and displaced thousands of residents in 22 of the state's 64 parishes.
Many of the estimated 150,000 homes and businesses damaged or destroyed did not have federal flood insurance.
"Historic flooding has uprooted homes and communities in every corner of our state," Edwards said Thursday. "The people who've been impacted need to be reassured that help is on the way, and I am extremely grateful to the president and our entire congressional delegation for their commitment to bring much-needed relief to the people of Louisiana."
S&P said it views federal, state, and insurance reimbursements as a credit positive because the total cost of expenditures related to the disaster will likely be fully mitigated.
"However, delays in collecting these funds could spill across several fiscal years and affect near-term budgetary performance and reserve levels," S&P analyst Jennifer Garza said Wednesday. "To the extent that local governments have enough liquidity to cover tax-base declines or financial losses, their credit quality will likely not deteriorate."
The 90% federal reimbursement rate is a credit positive for the state's reserve position, while the reimbursement rate for local governments is considered credit neutral, Garza said.
"We will continue to monitor each local government to assess the economic and financial impacts of the flooding, and take rating actions as necessary," she said.
