CHICAGO - Historic flooding in the Midwest has prompted an examination of 69 credits in four states by Standard & Poor's Corp., and could lead to future issuance of bonds to help rebuild communities that have incured billions of dollars in flood-related damages.

State and local officials along the Mississippi River and its tributaries said it was too early to place a final price tag on the flooding that has damaged public and private property and put thousands of acres of farmland under water. Standard & Poor's estimates the damage at $5 billion to $10 billion.

The disaster has not had any significant impact on prices of Midwest issues, market players say.

Jon Reichert, a vice president at the rating agency, said Standard & Poor's will begin contacting state and local governments, utilities, and hospitals in the affected areas this week to determine if there is any impact on credit quality.

"We want to find out the preliminary estimates of damage and how they think they will be paid for," Reichert said, adding that natural disasters historically have not precipitated rating actions.

In a credit comment, the agency said it will consider the net impact to the property tax base and the various municipal revenues pledged for debt service, as well as offsetting factors such as federal aid and the likely spurt in economic activity in the wake of the disaster cleanup.

Meanwhile, officials at Moody's Investors Service are also keeping on eye on credits affected by the flooding. Paul Devine, a vice president and manager of the rating agency's Great Lakes region, said that general obligation bond ratings are less likely to be affected by the flood. Moody's would most likely focus on project-specific bond ratings when the waters recede, he said.

"There are some serious and immediate problems. But the key for us is to determine if they become long-term problems," Devine said.

Dina Kennedy, vice president and assistant director of the central region at Moody's, said that local governments could experience some cash flow problems but added that funds from cleanup and rebuilding efforts could solve them.

Fitch Investors Service on Thursday said that the flooding is not expected to affect the ratings of the four major Iowa utilities it rates.

Government officials in the area where infrastructure is under water said a significant amount of funds will be needed to make repairs.

"Clearly coming out of this there will be a huge infrastructure issue to address," said Mike Belletire, deputy chief of staff for Gov. Jim Edgar of Illinois. "There are roads under water and sewer systems that presumably won't function as they did before the flood."

Larry Thornton, deputy treasurer of Iowa, said that after the flood waters subside, local governments could issue bonds to provide funds for various infrastructure repairs. Of all the Midwest states, Iowa was hit hardest by the flooding.

Ruth Reynolds, an alderman in Davenport, Iowa, who spoke on behalf of Mayor Pat Gibbs, said the city would consider issuing bonds to build a flood wall when the waters recede. She said that the 10-member city council several times in the past decade has rejected the construction of a levee, primarily because it would block the city's picturesque view of the Mississippi River.

But now with the river on Davenport's downtown streets, Reynolds said that the council could have a change of heart.

"There were those that thought it would spoil the riverfront. They were looking at aesthetics," Reynolds said. "But public sentiment is beginning to build now on the flood wall. All council members are certainly willing and wanting to look at things again."

Reynolds said that Gibbs estimated damages in Davenport at $100 million.

Ted Chapler, executive director of the Iowa Finance Authority, said state officials are talking with the Clinton administration about resurrecting governments' ability to issue mortgage revenue bonds and industrial development revenue bonds, which expired June 30, 1992, to assist flood victims.

Many issuers that have come to market in the last week have had concerns about the effect that negative publicity about the flood could have on their bond issues.

Iowa Treasurer Michael Fitzgerald said that the state, which sold $600 million of tax and revenue anticipation notes last week, was pleased with the sale.

"We were certainly concerned about [the sale]," said Fitzgerald, adding that the state waited a day until the national press was able to convey that the state would be able to survive the disaster.

One city official in Missouri expressed concern that the negative publicity about the flooding could harm an upcoming bond refinancing even though the city has yet to determine the extent of its damage.

"My gut is that [the flood) won't impact our ability to pay off bonds." the official said.

Flood conditions translated to very litle price movement on any outstanding tax-exempt debt. Municipal traders said Friday they were confident that any damage suffered by issuers would be covered by federal relief.

"The Street's feeling is that the feds are the on the hook for all of this," said the head trader of one large Wall Street-based firm.

However, Clinton made it clear on Thursday that while the federal government may eventually seek more than the $2.5 billion it has sought from Congress for disaster assistance, the administration will not be able to bear the entire cost.

Still, market participants remained optimistic. Commenting on an upcoming $285 million State of Missouri GO bond issue that is scheduled to hit the market this week, one trader said, "The Show-Me state? Got to have them. We love those bonds."

Standard & Poor's on Friday rated the issue AAA and continued the negative outlook, citing some potential downside risk for the state as a result of the flooding. Moody's rated the issue AAA on Thursday, saying the flood does not appear to have "any significant impact for the state's credit quality." Fitch Investors Service rated the issue AAA on Wednesday, noting that Missouri has "a broad based-economy with considerable diversity, which mitigates the economic impact of the current severe flooding."

Indeed, most communities are looking to President Clinton to bail them out with federal funds.

Under Federal Emergency Management Agency guidelines, the federal government will pick up the tab for 75% of the public property damages, with the remainder coming from state and local governments. However, Iowa Gov. Terry Branstad has asked Clinton to waive the local portion, as former President Bush did for local governments in Florida when Hurricane Andrew struck last year. So far, Clinton has promised $2.5 billion in federal aid.

State government most likely will not be significantly affected by the flood, according to Dr. Sung Won Sohn, a senior vice president and chief economist at Norwest Corp. in Minneapolis.

"The impact on state government will be meaningful, but not devastating," Sohn said.

Though the flooding has been widespread in the Midwest, communities in Iowa have borne the brunt of the damage, Sohn said. All of Iowa's 99 counties have been given federal disaster status by clinton.

"I think of all the states, Iowa is certainly the hardest hit," Sohn said.

Des Moines, located at the juncture of the Des Moines and Reccoon rivers, has been without drinking water since July 10 when the river overflowed into the city's water treatment plant. Clinton has said Des Moines is the most populated city that has lost its water supply. Federal officials said running water for non-drinking purposes could be restored early next week. Damages in the city have been estimated at at least $250 million.

At least two downtown Des Moines bond firms were forced to relocate their operations because of the drinking water crisis.

In Illinois, 20 counties have been given federal disaster status, with another seven having been named state disaster areas by Edgar.

Belletire, the governor's deputy chief of staff, said the impact of the flood on Illinois, which has 400 miles of riverbank, is "horrendous." He said the General Assembly already has appropriated $10 million, which will largely go toward paying the National Guard.

Dick Adorjan, spokesman for Illinois Emergency Management Agency, said that damages in in the states will be in the billions of dollars, but it is too soon to give precise numbers. The Illinois communities hardest hit by the flood include Grafton and Quincy, Adorjan said.

In Missouri, 49 counties have been assigned federal disaster status, according to Tim Bommel, public information officer for the Federal Emergency Mangement Agency in Missouri. He said that 6.8 million acres of farmland, representing about 80% of the state's prime agriculture, has been damaged by the floods.

"This crisis isn't over until it stops raining," said Dick Murray, a vice president at A.G. Edwards & Sons in St. Louis.

In Wisconsin, damage has been estimated at $131 million, according to Stephanie Smith, spokeswoman for Gov. Tommy Thompson. She said that 37 counties have been designated as state or federal disaster areas.

Frank Hoadley, Wisconsin's capital finance director, said that the flooding will not have a significant effect on the state.

"We've got a lot of crop damage and so forth, but not to the extent of other states," Hoadley said. "We had a strong economy going into this thing. [The flooding] will not slow this down."

In Minnesota, damages has been estimated at $1 billion, according to Patrick Sexton, spokesman for Gov. Arne Carlson. He said 28 counties have been designated federal or state disaster areas.

Minnesota had less severe damage due to its location on the Mississippi River's head waters, according to Ed Lotterman, an agricultural economist at the Minneapolis Federal Reserve. He said the economic loss could total about 1% of the state's $100 billion economy.

Janelle Toman, spokeswoman for Gov. Walter Miller of South Dakota, said that flood damage in the southeastern portion of the state could exceed the Federal Emergency Management Agency's estimate of $595 million. She said that $571 million of the damages covered agricultural losses, $12 million covered public building losses, $10 million covered residential Losses, and $2 million covered business losses.

Toman said that 17 counties have been designated as state disaster areas. She added that she expected Clinton to fulfill Miller's request that the counties be designated federal disaster areas.

Sohn at Norwest estimated total crop losses in the Midwest at $2 billion, with South Dakota expected to register the biggest loss in terms of the percent of 1992 state personal income. South Dakota's losses would equal 2% of personal income, while Iowa's would be 1.5%, he said.

Sohn projected property losses at another $5.5 billion, bringing the estimate of total damages as of Friday to $7.5 billion.

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