This publication examines the influence of credit ratings on public debt financing and helps to resolve some of the developing controversy concerning this subject. It investigates the rating activities of the two private investment advisory firms--Moody's and Standard & Poor's--and the use of ratings by governmental borrowers, investors, investment bankers, and the regulatory bodies for banks and insurance companies. The behavior of these participants in the municipal market provides clear evidence that ratings significantly affect the cost of capital to public borrowers. The majority of the task force members believe that the rating agencies are doing a creditable job given their resources. To improve the structure of the rating system and its uses by the various market participants, the task force made a number of recommendations, such as additional disclosures of criteria used in determining ratings, more frequent review of outstanding issues, separate ratings for short-term debt, and cooperation with all market participants in improving the understanding of ratings and their importance in communicating essential financial information. The major recommendation is to establish a national data bank to accumulate local government statistics and financial information for dissemination to all market participants. (Author/DN)