BRADENTON, Fla. — Triple-A rated South Carolina and most of its local governments are positioned financially to weather the immediate costs created by recent storms and floods that killed at least 19 people, Moody's Investors Service said.
“We have now entered the largest recovery program our nation offers in an almost unprecedented timeframe,” said Gov. Nikki Haley. “This will not be a short or easy recovery, but we will get through it.”
While flooding remains a challenge, the credit impact from the storm will be minimal, said Edna Marinelarena, who co-authored the Moody's special report, released Wednesday.
“The reliability of Federal Emergency Management Agency reimbursements and the solid liquidity position of the state and local governments themselves will alleviate most long-term credit effects,” Marinelarena said.
The state and the hardest-hit counties maintain liquidity and high reserves that will offset near-term cash outflows for emergency response personnel overtime and capital repairs before FEMA reimbursements are received, Marinelarena said.
While cash-flow disruption is a common, short-term risk after a natural disaster, a majority of state and local governments have fiscal positions that improved in recent years as a result of strong receipts in major revenues, including property, income and sales taxes, she said.
South Carolina’s general reserve and capital reserve funds were both fully funded at the end of fiscal 2015 at the constitutionally required amounts of $319.5 million and $127.8 million, respectively.
For cities and counties, the median general fund balance as a percentage of revenues stood at a high 34.4%, while their median general fund net cash as a percentage of revenues stood at a high 34.1%, according to Moody’s.
Hard-hit counties include Aaa-rated Charleston, Aa2-rated Horry, and Aa1-rated Lexington and Richland.
At the end of fiscal 2014, the general fund net cash position as a percent of revenues for those counties was 22.4% in Charleston, 47.6% in Horry, 59.1% in Lexington, and 37.4% in Richland.
Moody’s also said that some governments can borrow for cash-flow purposes by issuing notes.
“We expect that the majority of repair and rebuilding costs will be reimbursed primarily by FEMA,” Moody’s said. “Should FEMA aid take significantly longer than one year, however, it could place negative pressure on financial operations and liquidity of some entities.”
Other reimbursements will come from state and local resources and private insurance.
The state-owned South Carolina Public Service Authority reported limited effects from the storm system on generation facilities, though power restoration in some areas was difficult due to road conditions, according to Moody’s.
The A1-rated SCPSA, also called Santee Cooper, provides electricity to more than 40% of the population.
As floodwaters continued to rise and breach dams, President Barack Obama on Monday issued a major disaster declaration for South Carolina, and ordered federal aid to supplement state and local response efforts.
The declaration makes federal funding available to individuals in Charleston, Dorchester, Georgetown, Horry, Lexington, Orangeburg, Richland, and Williamsburg counties.
Severe storms and flooding began to hit South Carolina on Oct. 1 and continued through the weekend heightened by the effects of Hurricane Joaquin as it passed the state without making landfall.
The highest recorded amount of rain was 26.8 inches east of Charleston.