Fitch expects above-average local government downgrades in 2013

Mon Dec 3, 2012 11:43am EST

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Dec 3 (Reuters) - A clutch of ongoing fiscal problems, including rocky revenues and underfunded pensions, will likely bring a large number of credit rating downgrades for U.S. local governments next year, Fitch Ratings said on Monday.

"An uneven revenue recovery, reduced spending flexibility, labor and pension pressures, and questionable willingness to pay, will likely result in a continued above-average rate of local government downgrades in 2013," the agency said in an outlook for the year.

Most local governments rely on property taxes for revenues and, with the housing market remaining weak, many are still struggling. Fitch said it expects downgrades in the "one-to-two-notch range," but severe downgrades are possible.

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