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Criteria I Governments I U.S. Public Finance: U.S. Local Governments General Obligation Ratings:Methodology And Assumptions III. SUMMARY OF CHANGES FROM THE REQUEST FOR COMMENT See Appendix III in Section IX. IV. IMPACT ON OUTSTANDING RATINGS 7. Standard&Poor's maintains issuer credit ratings or ratings on GO debt(or debt equivalent to or based on the GO rating)for more than 4,000 governments included in the scope of the criteria.Assuming that governments maintain their current credit characteristics,testing suggests that about 60%of the ratings would remain unchanged under the criteria while about 30%of the ratings would increase and about 10%would decrease,generally by one notch. V. EFFECTIVE DATE AND TRANSITION 8. The criteria described in this article are effective immediately and apply to all new and outstanding ratings within scope.We intend to complete our review of issuers affected within the next 12 months. VI. METHODOLOGY A. Local Government Rating Calibrations 1. Local Governments Globally 9. Local governments exist to provide services to the population. Services may be mandated by a higher-level government,but often the levels and choice of services to be provided are at the local government's discretion. Governments may rely on locally levied and collected taxes or user charges, or on taxes,grants, or aid distributed from higher levels of government to fund services. Local governments often have little direct control over funds distributed from higher levels of government, and higher-level governments may place restrictions on local taxing levels--if local taxes may be levied at all. 10. A local government's ability and willingness to make fiscal adjustments and its legal and political relationships with higher levels of government can be more important to its ability to meet debt service than its economic trends or financial position.An overall economic decline can threaten the ongoing paying ability of a company more directly than a government because the company may find it difficult to raise prices or reduce costs due to demand elasticity. Although unpopular,governments with sufficient autonomy may raise taxes or cut services without seeing mass outmigration from the jurisdiction relative to the demand volume reduction faced by a company. For governments without such autonomy,relationships with higher-level governments are key for restoring balance. 11. Variables such as economic conditions, debt levels,and financial performance can suggest when difficult decisions to restore fiscal balance might become necessary,but do little to suggest whether prudent decisions will be made. Different government responses can therefore produce different default outcomes for periods with the same level of WWW.STANDARDANDPOORS.COM/RATINGSDIRECT SEPTEMBER 12,2013 6 1190266 1300881696