L.A. County delays $1.1-billion debt sale amid state's woes
More fallout in the municipal debt market from California's financial crisis: Los Angeles County today delayed plans to borrow $1.1 billion via short-term notes, saying it wants to give investors more information about the potential effects on county finances from state budget cuts.
L.A. County routinely borrows money at this time of year via so-called tax and revenue anticipation notes, which provide a cash bridge to cover expenses ahead of future tax payments.
The note sale had been scheduled for Thursday. But Glenn Byers, assistant treasurer for the county, said officials want to go back to Wall Street investors to brief them on the state’s latest cost-cutting proposals.
One of Gov. Arnold Schwarzenegger’s proposals is to slash the CalWorks aid program, which mostly assists single mothers with children. If CalWorks were to end altogether -- although that seems unlikely given Democratic opposition -- affected mothers probably would shift to counties' general relief welfare programs, costing L.A. County $400 million or more a year, Byers said.
Municipal market investors "are already spooked" by California’s mess, Byers said. "This is more noise."
As I noted in this post on Tuesday, yields on the state’s general obligation bonds have jumped over the last week amid growing investor concern about the budget debacle.
L.A. County, however, has long had a solid financial reputation on Wall Street. Its short-term notes have the highest ratings from credit-rating firms Standard & Poor’s and Moody’s Investors Service. The county expected to pay a modest 0.5% annualized tax-free interest rate on the new notes.
To preserve its ratings and a low interest rate, Byers said the county would emphasize to investors that "as the state makes cuts, we will make cuts."
He noted that "all of the counties are in the same boat. . . . It’s really ugly."
-- Tom Petruno