Sept 12 (Reuters) - The widespread damage caused by Hurricane Irma is unlikely to impact local government credit quality in Florida and other Southeast U.S. states battered by the storm, according to a Moody’s Investors Service report on Tuesday.
U.S. counties and municipalities in the hurricane-prone Southeast have strong track records of recovering from storms without stopping payments to bondholders, Moody’s said.
“This pattern is likely to be repeated in the affected areas of the Southeast,” the report said.
The total economic cost of Hurricane Irma is expected to be between $58 billion and $83 billion, among the most expensive storms in U.S. history, according to a Moody’s Analytics estimate on Tuesday.
Irma, which first made landfall in Florida on Sunday as a Category 4 hurricane, caused severe wind and flooding damage to property and infrastructure while knocking out power to millions of residents in Florida alone. It has since weakened and moved north towards Tennessee.
Local governments typically face liquidity challenges after large natural disasters as they draw on reserves to pay debt services and fund cleanup costs, Moody’s said.
Longer-term problems could arise if property values decrease, populations decline and rebuilding produces weaker-than-anticipated stimulus effects, it said.
But local governments in the states of Florida, rated Aa1, Georgia, rated Aaa, South Carolina, rated Aaa, Alabama, Aa1 and Tennessee, rated Aaa, have mechanisms in place that lessen the long-term economic risks posed by hurricanes, Moody’s said.
The blow to local governments hit by Irma will be softened when they receive state and federal emergency aid, Moody’s said.
In the meantime, many counties and municipalities sell notes to tide them over while their tax bases improve and state and federal reimbursements roll in, it said.
Local governments in the disaster-struck area also tend to have reserves to handle the costs associated with immediate recovery efforts, Moody’s said.
In Florida, the state’s catastrophe fund and insurance program will help speed up economic recovery in local governments, it said. (Reporting by Laila Kearney; Editing by Phil Berlowitz)