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Criteria I Governments I U.S. Public Finance: U.S. Local Governments General Obligation Ratings:Methodology And Assumptions Budgetary Tabli-11 Assessing The _ . ; Taial Govern nwnial Funds Net Result ) General Fund Net Result (%) >-1 -1to5 5to-10 -10 to-1E fAE (>5) 1 2 3 3 4 (-1 to 5) 2 3 3 4 5 L*-1) 1 3 4 4 5 5 A score of`1',°2',`3',`4' and E means wery strong. strong, adequate, weak, and very weak, respectively. Qualitative factors Wth a positive impact on the initial Qualitative factors with a negative irrpact on the initial score, score, Expected strudural improvement: if projecti a n s fo r th e Expeded struduraI deteroration: ifprojedions forthe current current}ear and follo vii ng year suggested a better initial year and fallowing year suggested a worse initial sere,the scare sere,the scare%wuId improve by ane paint.The score would wmrsen by one or too points.To worsen bytm points, vwould improve bytvo pointsonlyifrequired a dj ustm ents to expected performance must fall to the commensurate level within revenues or expend itu res t o pro ducethe result were already the current yea r. approved. Deferred payments on a cash basis: in cases where g a a d ratios hide significant underspending due to deferred payments,the deferral produces a better scare. Significant h isto ri c vo I atil ity i n performance because afvery cyclical revenues (e.g. ail& gas a &alestaxes on luxury goads andlor dependence an volatile state transfers)or exposure to event{elated ri sks, and the sources afvalatilfty remain. For each relevant qualitative factor,the sere changes by a n e point, except fior expected struduraI impro vement a deterioration which could result in a difference oftvo paints relative to the initial scare. The Ina I budget performance scare equals the initial scare adjusted up ardown besed on the net effect ofthequaIitative fa dors. tletri csthat equal a cut-o ffpoint betweentwa initial sco res will equate to th a woo rse scare. 66. Various qualitative factors may raise or lower the final budget performance score relative to the initial score, as shown in table 11. 67. The budgetary performance score begins with a measure based on the most recent year reported because it is observable and verifiable. The criteria will usually smooth planned capital expenditures to arrive at a more sustainable view of ongoing performance by eliminating the spending of borrowed funds for capital expenditures.Adjustments are also made for net transfers to identify the structural result. 68. However,future credit quality is dependent on current and future performance.Accordingly,the score can be adjusted by one or at most two points if actions or events subsequent to the date of the measure suggest different results in the coming years. Examples of actions warranting such adjustments include updated current-year estimates,new budgets, or budget amendments featuring approved revenue or expenditure adjustments. The criteria also compensate for artificially positive outcomes resulting from deferred expenditures, such as underfunding required pension WWW.STANDARDANDPOORS.COM/RATINGSDIRECT SEPTEMBER 12,2013 24 1190266 1300881696