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Moody's cuts one L.A. bond rating but weighs raising another

After high-profile bankruptcies in Stockton and San Bernardino, the Wall Street rating agency Moody’s Corp. has been reviewing the financial stability of dozens of California cities in recent months.

The agency’s assessment of Los Angeles has been mixed.
Last week Moody’s downgraded the city’s rating for so-called judgment obligation bonds to A2 from A1, according to City Administrative Officer Miguel Santana. The firm assigned a “stable outlook” rating to the bonds, which the city issues to pay settlements in lawsuits. But the downgrade sends a message that the city must address its structural deficit, according to Santana, who has pushed city officials to shrink the city’s workforce and raise taxes.

The downgraded bonds are backed by the city’s general fund, which faces a deficit of $500 million over the next two fiscal years.

But the news from Moody’s was not all bad. The agency also announced that it was reviewing the city’s general obligation bonds for a possible upgrade. The general obligation bonds are backed by property taxes, Santana said. And while other parts of the state saw property values nosedive during the recession, L.A.’s have remained relatively stable, Santana said.


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-- Kate Linthicum at Los Angeles City Hall


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