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Criteria I Governments I U.S. Public Finance: U.S. Local Governments General Obligation Ratings:Methodology And Assumptions g) Structural imbalance 35. The final rating is capped at'BBB+'when the entity has structural imbalance. For this purpose structural imbalance is determined over a four-year horizon(past two years, current year, and next fiscal year).Additionally,management does not have a credible plan to adequately correct the imbalance. Characteristics of structural imbalance include: • Significant use of one-time revenue, • Borrowing for ongoing operations, • Unplanned fund balance drawdowns, • Recurring unbudgeted expenditure and revenue mismatch, and • Significant dependence on volatile revenue. C. The Institutional Framework Score 36. The institutional framework score assesses the legal and practical environment in which the local government operates.Accordingly, all governments of the same type within the same state receive the same score. Since state constitutions and state laws generally dictate the terms under which local governments may operate,the score reflects these state-specific elements. To enhance comparability with local governments outside the U.S.,the criteria assess the same areas as detailed in paragraph 39 of our criteria, "Methodology For Rating International,Local,And Regional Governments",published Sept. 20, 2010. Specifically,these areas include predictability,revenue and expenditure balance,transparency and accountability, and system support. Scores for each area,however,use slightly different measures that are more specific and more relevant to the U.S. and range from'1'(the best)to'5'(the worst). The criteria then average each of the scores equally to determine the overall institutional framework score as detailed in table 3. Table 3 Institutional •rk Score Outcomes Score Range Institutional Framework Score 1(very strong) 1.75-2.75 2(strong) 3.0-3.75 3(adequate) 4-4.5 4(weak) 4.75-5 5(very weak) The institutional framework score results from the average of the scores for predictability,revenue and expenditure balance,transparency and accountability,and system support(see paragraphs 37-40).Each score receives equal weight in the average. 1. Predictability 37. Predictability assesses the extent to which a local government can forecast its revenues and expenditures on an ongoing basis.The ability and frequency of changes to municipal responsibilities or revenue raising capabilities resulting from state or statewide voter actions can complicate local government decision making.An inability to sufficiently plan and implement strategies to accommodate these changes can affect a government's fiscal position. Table 4 details the scoring for predictability. WWW.STANDARDANDPOORS.COM/RATINGSDIRECT SEPTEMBER 12,2013 14 1190266 1300881696