Municipalities Challenge Bond Ratings

Local officials say double standard cheats taxpayers
By Jim O'Neill,  Newser User
Posted Mar 3, 2008 12:20 PM CST
Cars rolls on an existing portion of the Florida Keys Overseas Highway in Key Largo, Fla., while construction workers build a new bridge Friday, Feb. 29, 2008. The 1.4-mile-long span is a facet of a $300...   (Associated Press)
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(Newser) – City and state officials are mounting a rebellion against bond rating firms they say are siphoning off billions of taxpayer dollars by giving them unfairly low credit ratings, the New York Times reports. Even though municipal bonds are generally safer than those issued by corporations, municipalities get lower credit scores, which in turn means higher interest and insurance fees.

“Taxpayers are paying billions of dollars in increased costs because of the dual standard used by the rating bureaus,” says the treasurer of California, who is leading the charge to reform muni bond ratings. He says his state, one of the largest issuers of munis, is rated A and should be AAA. Congress plans a March 12 hearing to examine the system.