The last of the nation’s top financial credit agencies took action Tuesday to downgrade Los Angeles’ credit rating, which will almost assuredly increase the city’s cost for borrowing money.
City Administrative Officer Miguel Santana said Standard & Poor’s downgrade stemmed from its concerns about the significant drop in tax revenues and the city’s plans to draw on its reserve fund to end the year in the black.
[Updated 3:50 p.m.: The city’s rating moved from "AA" to "AA-minus," a mark still considered to be a relatively high grade. The state of California, by contrast, is rated “A-minus” by S&P.]
Though Standard & Poor’s acknowledged that the city had taken steps to close its budget gap — including last week’s authorization to eliminate 4,000 city workers to save as much as $300 million next fiscal year. But analysts continue to be concerned about the city’s structural deficit.
“They want to see action,” Santana said. “They want to make sure that the plan we’ve laid out actually reaches fruition and is completed. … The next question they will be asking when they review us again is, did you reduce those 4,000 positions.”
Last week, Moody’s Investors Service reduced its opinion of L.A.’s finances from "stable" to "negative" because city officials had delayed addressing the budget shortfall — currently $212 million — and have proposed tapping reserves to balance the books. In November, L.A.’s credit was downgraded by Fitch Ratings, which determined that Mayor Antonio Villaraigosa and the City Council failed to take adequate action to address the fiscal crisis.
Council President Eric Garcetti said the downgrade by Standard & Poor’s had been expected, but he emphasized that the council and mayor also had taken swift action to address the concerns raised, including approving layoffs, adopting a three-year budget plan and taking action to replenish the city’s reserve fund and balance the budget.
— Maeve Reston and Phil Willon at Los Angeles City Hall
Photo: L.A. Times file of Santana
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