Municipal defaults and bankruptcy actions similar to those recently taken by the cities of Stockton and San Bernardino in California are likely to remain few in number but may indicate a new trend in fiscally troubled cities unwilling to pay their debt obligations, says Moody's Investors Service in a report.

"The looming defaults by Stockton and San Bernardino raise the possibility that distressed municipalities -- in California and, perhaps, elsewhere -- will begin to view debt service as a discretionary budget item, and that defaults will increase," said Van Praagh, author of the report, "Recent Local Government Defaults and Bankruptcies May Indicate A Shift in Willingness to Pay."

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