Alert April 28, 2010

L.A.’s Credit Ratings Slide

Moody’s Investors Service and Fitch Ratings recently downgraded the City of Los Angeles’s general obligation debt to Aa3 and A+, respectively.  Standard & Poor’s has not reduced its AA- rating on L.A.’s G.O. debt, but recently put the debt on a negative credit watch.  Fitch also downgraded certain of the City’s certificates of participation and lease revenue bonds.

The rating downgrades are thought to stem from L.A.’s budget woes and the recent standoff between Mayor Villaraigosa and the City Council over job cuts and utility rates.  Los Angeles has projected a $148.9 million budget deficit for fiscal year 2009-10, and the Mayor’s budget proposal for fiscal year 2010-11, released April 20, 2010, paints an even bleaker picture.  In his State of the City address, presented in conjunction with the release of his new budget proposal, the Mayor warned that “painful” layoffs and service cuts would be required to bridge the $485 million budget deficit for the coming fiscal year.