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Woodland on list for possible credit downgrade

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From page A2 | October 10, 2012 | 1 Comment

SACRAMENTO — One of the nation’s top credit rating agencies announced Tuesday that it will review dozens of California cities for possible downgrades amid mounting concern over municipal bankruptcies and bond defaults.

Moody’s Investors Service will scrutinize the ratings of various types of bonds in 30 California cities, including Woodland. The agency also announced that it already had downgraded eight municipal pension obligation bonds.

“California cities operate under more rigid revenue raising constraints than cities in many other parts of the country,” Eric Hoffmann, who heads Moody’s California local government ratings team, said in a statement. “Combined with steeply rising costs, these constraints mean that these cities will likely recover more slowly than their peers nationally, even if the state’s economic recovery tracks the nation’s.”

Cities under review include Danville, Santa Monica, Sacramento and Fresno. Moody’s will examine an array of factors, including falling tax revenue and increased spending.

Any downgrades would increase borrowing costs for cities and could hinder their ability to borrow for infrastructure projects.

The announcement follows an August report in which Moody’s predicted more municipal bankruptcies and defaults in California, the nation’s largest issuer of municipal bonds. Moody’s warned that some cities are turning to bankruptcy as a new strategy to tackle budget deficits and abandon obligations to bondholders.

Three California cities — Stockton, San Bernardino and Mammoth Lakes — filed for bankruptcy over the summer, although Mammoth’s filing was the result of losing a lawsuit.

Last week, the agricultural city of Atwater declared a fiscal emergency and became the latest embattled community to consider bankruptcy.

Moody’s, which rates 95 California cities, said it also will review San Francisco and Los Angeles for upgrades.

The other cities that Moody’s has targeted for possible downgrades are Azusa, Berkeley, Colma, Downey, Glendale, Huntington Beach, Inglewood, Long Beach, Los Gatos, Martinez, Monterey, Oakland, Oceanside, Palmdale, Petaluma, Rancho Mirage, Redondo Beach, San Leandro, Santa Ana, Santa Barbara, Santa Clara, Santa Maria, Santa Rosa, Sunnyvale, Torrance and Woodland.

The Associated Press

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  • Rich RifkinOctober 10, 2012 - 10:55 am

    "The other cities that Moody’s has targeted for possible downgrades are Azusa, Berkeley, Colma, ... Torrance and Woodland." One thing Berkeley has not done, and this is likely the case with most or even all of the 30 cities on Moody's list, is adopt a true pension reform. In late August, Berkeley reached an agreement with its police officers which created a lower, second-tier pension for its new hires. The current police get the impossibly expensive 3% at 50 (same as in Davis and most agencies). The new cops will get 3% at 55. That is not reform. That will not save Berkeley much money at all. That contract likely will doom Berkeley's finances for many more years. Davis has not yet adopted a lower, second-tier for our new police and fire hires. (Negotiations are ongoing.) If Davis follows the path Berkeley took, we will be doomed, too. Examples of cities we should look to include the City of Carlsbad, which just adopted 2% at 50 for new hires and Cathedral City, which just recently agreed to a new second tier for fire of 2% at 55. Those formulas are sustainable. Only real reform will keep Davis from going bankrupt.

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