Approximately $14.3 billion of debt affected
New York, October 09, 2012 -- Moody's Investors Service has placed under review the lease-backed
obligation and/or general obligation ratings of 32 cities in California,
and has downgraded the pension obligation bonds of eight cities and one
pooled financing. The reviews are mostly for downgrade, although
the general obligation bond ratings of Los Angeles (Aa3) and San Francisco
(Aa2) are on review for upgrade. A total of ten issuers'
pension obligation bonds (including the pooled financing) are under review
for possible downgrade, including eight that were downgraded with
this rating action.
The reviews and downgrades reflect a combination of fundamental economic
pressures in the state, the different way in which various revenue
sources have been affected and the factors that influence a city's
ability and willingness to pay the obligations backed by these revenue
sources. Most affect securities that are paid from a city's
general funds and do not benefit from a specific pledged revenue source.
Moody's identified these securities as part of an overall review
begun in mid-August of the credit standing of 95 rated cities in
California.
A full list of ratings affected follows below.
RATING RATIONALE
Today's downgrades and reviews are based on the trends noted in
Moody's August 17, 2012 Special Comment "Why Some California
Cities are Choosing Bankruptcy." These include the effects
of the recent economic and property market downturns, limitations
on the cities' ability to raise property taxes, rising fixed
costs, and state laws and local precedents that make bankruptcy
filings a potentially viable means to address these pressures.
"California cities operate under more rigid revenue raising constraints
than cities in many other parts of the country," says Senior
Vice President Eric Hoffmann, who heads Moody's California
local government ratings team. "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."
A few recent high-profile bankruptcy filings by cities in the state
demonstrate that the willingness of some cities to continue to cut costs
and associated municipal services to pay debt obligations may be eroding.
For the most part, this affects the debt obligations that are paid
out of a city's general fund, such as pension obligation bonds
and leased-backed obligations, and that must compete with
other priorities for payment.
"Many cities' assessed valuations for the property taxes that
support their general obligation bonds have declined only modestly in
recent years, but their general funds have come under significantly
more pressure," Moody's Hoffmann says. "Since
the adoption of Proposition 13 in the late 1970's, the cities'
inability to access their local property tax bases for increased operating
funds led to diversification into even more economically- sensitive
revenue sources, such as sales, business and hotel taxes.
These trends have prompted the review for downgrade of 27 cities'
lease-backed obligations paid from cities' general funds.
The pension obligation bonds (POBs)of nine issuers, also primarily
paid from cities' general funds, were downgraded, and
eight of these, along with one other city's POBs, remain
under review for possible further downgrade. In the event of a
default or bankruptcy, lease-backed debt, especially
for an essential asset, could be more likely to be paid than pension
obligations.
Moody's also placed under review for downgrade the general obligation
ratings of nine cities, eight of which are rated in the Aaa to Aa
range.
"Although the risks of a general obligation bond default are lower
than the risks of a general fund default, they still exist for cities
pressured by stagnant revenues and rising fixed costs, and with
relatively easy access to bankruptcy protection in California,"
Moody's Hoffmann says. "These risks may be inconsistent
with these cities' current high ratings."
In contrast, Moody's placed the general obligation bond ratings
of Los Angeles and San Francisco under review for upgrade as a reflection
of significant tax bases that have demonstrated relative resiliency during
the economic and property market downturns.
WHAT COULD MOVE THE RATINGS UP OR DOWN
Negative factors that could drive downgrades of California cities include
economic weakening, revenues failing to keep pace with expenditure
growth, and declines in fund balance. Weakness in general
fund finances could also result in a widening of the notching between
ratings on a city's POBs and lease-backed obligations and
its general obligation rating. Positive factors that could move
ratings up include robust tax base growth, a balance between revenue
and expenditure growth, and growth in fund balances.
For more information, see today's report "Key Drivers
of California Cities' Rating Actions and Reviews" and Moody's
August 17 report "Why Some California Cities are Choosing Bankruptcy."
The principal methodologies used in these ratings was General Obligation
Bonds Issued by U.S. Local Governments published in October
2009 and The Fundamentals of Credit Analysis for Lease-Backed Municipal
Obligations published in October 2004. Please see the Credit Policy
page on www.moodys.com for a copy of these methodologies.
TODAY'S RATING ACTIONS FOR CALIFORNIA CITIES:
AZUSA
Issuer Rating
A2 Rating under review for downgrade
2003 Lease Revenue Refunding Certificates of Participation
$4.8 million
Baa1 Rating under review for downgrade
BERKELEY
2003 Certificates of Participation
$28 million
Aa3 Rating under review for downgrade
2010 Certificates of Participation (Animal Shelter Financing)
$5.8 million
Aa3 Rating under review for downgrade
Lease Revenue Bonds Series 1999
$9.1 million
A1 Rating under review for downgrade
COLMA
Certificates of Participation, 2003
$14.9 million
A1 Rating under review for downgrade
DANVILLE
Certificates of Participation (2005 Capital Improvement Project)
$5.6 million
Aa2 Rating under review for downgrade
DOWNEY
Taxable Pension Obligation Bonds, 2005 Series A
$20.6 million
A2 Rating under review for downgrade (Downgraded from A1/No Outlook)
FRESNO
Taxable Pension Obligation Bonds, Refunding Series of 2002
$205.3 million
Baa2 Rating under review for downgrade (Downgraded from Baa1/Negative
Outlook)
Judgment Obligation Refunding Bonds, Series 2002
$5.4 million
Baa2 Rating under review for downgrade (Downgraded from Baa1/Negative
Outlook)
Lease Revenue Refunding Bonds (Street Light Acquisition Project),
Series 2002
$7.9 million
Baa2 Rating under review for downgrade
Lease Revenue Bonds (Various Capital Projects) Series 2004A
$15.8 million
Baa2 Rating under review for downgrade
Lease Revenue Bonds (Various Capital Projects) Series 2004B
$8.1 million
Baa2 Rating under review for downgrade
Lease Revenue Bonds (Various Capital Projects) Series 2004C (Federally
Taxable)
$28.9 million
Baa2 Rating under review for downgrade
Lease Revenue Bonds (Convention Center Improvement Projects) Series 2006A
$15.4 million
Baa2 Rating under review for downgrade
Lease Revenue Refunding Bonds (Master Lease Projects), Series 2008A
$38.6 million
Baa2 Rating under review for downgrade
Lease Revenue Refunding Bonds (Master Lease Projects), Series 2008C
$36.1 million
Baa2 Rating under review for downgrade
Lease Revenue Bonds (Master Lease Projects), Series 2008 E
$3.4 million
Baa2 Rating under review for downgrade
Lease Revenue Bonds (Master Lease Projects), Series 2008 F
$21.4 million
Baa2 Rating under review for downgrade
Lease Revenue Bonds (Police and Fire Master Lease Projects) Series 2009A
$43.4 million
Baa2 Rating under review for downgrade
GLENDALE
Issuer Rating
Aa1 Rating under review for downgrade
Variable Rate Demand Certificates of Participation, Series 2000C
(2000 Police Building Project)
$50 million
Aa2 Rating under review for downgrade
HUNTINGTON BEACH
Judgment Obligation Bonds, Series 2004
$12.5 million
Aa3 Rating under review for downgrade (Downgraded from Aa2/No Outlook)
INGLEWOOD
Pension Obligation Bonds, 2005 Series A, Series B and (Forward
Delivery) Series C
$65 million
A3 Rating under review for downgrade
Current Interest Refunding Bonds
$18.9 million
Baa1 Rating under review for downgrade
Capital Appreciation Bonds
$11.9 million
Baa1 Rating under review for downgrade
LONG BEACH
Issuer Rating
Aa2 Rating under review for downgrade
Lease Revenue Bonds, 2006 Series B
$24.3 million
A1 Rating under review for downgrade
Lease Revenue Refunding Bonds, 2006 Series A (Rainbow Harbor Refinancing
Project)
$50.8 million
A1 Rating under review for downgrade
Lease Revenue Refunding Bonds Series 2003A (Non-AMT) & Series
2003B (AMT)
$120.2 million
A1 Rating under review for downgrade
Lease Revenue and Refunding Bonds (Temple & Willow Facility) 1998
Series B
$29.6 million
A1 Rating under review for downgrade
LOS ANGELES
General Obligation Bonds
$3.17 billion
Aa3 Rating under review for upgrade
Judgment Obligation Bonds, Series 2009-A
$20.5 million
A2 Stable (Downgraded from A1/Stable Outlook)
Judgment Obligation Bonds, Series 2010-A
$50.9 million
A2 Stable (Downgraded from A1/Stable Outlook)
LOS GATOS
Issuer Rating
Aa1 Rating under review for downgrade
2010 Certificates of Participation (Library Project)
$15.7 million
Aa2 Rating under review for downgrade
Certificates of Participation Series 2002 A (Capital Improvement Project)
$10.7 million
Aa2 Rating under review for downgrade
MARTINEZ
Certificates of Participation (2003 Refinancing Project)
$7.8 million
Aa3 Rating under review for downgrade
MONTEREY
Monterey Joint Powers Finance Authority Lease Revenue Dated 3-1-94
$4.1 million
Aa3 Rating under review for downgrade
Lease Revenue Bonds, Series 2002
$9.9 million
A1 Rating under review for downgrade
OAKLAND
Taxable Pension Obligation Bonds, Series 2001
$195.6 million
Aa3 Rating under review for downgrade (Downgraded from Aa2/Stable Outlook)
Refunding Revenue Bonds, 2005 Series A-1 (Auction Rate Securities)
(Tax-Exempt); Refunding Revenue Bonds, 2005 Series A-2
(Auction Rate Securities) (Taxable) & 2005 Series B (Auction Rate
Securities) (Taxable Bonds)
$145 million
A1 Rating under review for downgrade (Downgraded from Aa3/Stable Outlook)
Lease Revenue Refunding Bonds, 2008 Series A-1 (Tax-Exempt)
$107.6 million
A1 Rating under review for downgrade (Downgraded from Aa3/Stable Outlook)
Lease Revenue Refunding Bonds, 2008 Series A-2 (Federally
Taxable)
$20.3 million
A1 Rating under review for downgrade (Downgraded from Aa3/Stable Outlook)
Taxable Pension Obligation Bonds, Series 2012A
$212.5 million
A1 Rating under review for downgrade (Downgraded from Aa3/Stable Outlook)
OCEANSIDE
Taxable Pension Obligation Bonds, Series 2005
$17.7 million
A1 Rating under review for downgrade(Downgraded from Aa3/Negative Outlook)
Taxable Pension Obligation Bonds, Series 2005
$25.1 million
A1 Rating under review for downgrade (Downgraded from Aa3/Negative Outlook)
2003 Certificates of Participation (1993A Refunding)
$25.2 million
Aa3 Rating under review for downgrade
PALMDALE
Certificates of Participation (2002 Park Improvement and Avenue S Construction
Project)
$43.2 million
A1 Rating under review for downgrade
PETALUMA
2003 Certificates of Participation (Refunding Certificates and Airport
Project)
$6.3 million
Baa2 Rating under review for downgrade
RANCHO MIRAGE
Lease Revenue Bonds, Series 2005A (Public Facilities Project)
$5.9 million
Aa2 Rating under review for downgrade
REDONDO BEACH
Refunding Revenue Bonds 2008 Series A
$7.7 million
Aa2 Rating under review for downgrade
SACRAMENTO
Issuer Rating
Aa2 Rating under review for downgrade
2006 Capital Improvement Revenue Bonds, Series C (300 Richards Boulevard
Building Acquisition)
$28.8 million
Aa3 Rating under review for downgrade
2006 Taxable Capital Improvement Revenue Bonds, Series D (300 Richards
Boulevard Building Acquisition)
$2.4 million
Aa3 Rating under review for downgrade
2006 Refunding Revenue Bonds, Series E (Master Lease Program Facilities)
$187 million
Aa3 Rating under review for downgrade
2006 Capital Improvement Revenue Bonds, Series A and 2006 Series
B Taxable
$151.1 million
Aa3 Rating under review for downgrade
2003 Capital Improvement Revenue Bonds (911 Call Center and Other Municipal
Projects)
$68.5 million
Aa3 Rating under review for downgrade
SAN FRANCISCO
General Obligation Bonds
$2.98 billion
Aa2 Rating under review for upgrade
Lease Revenue Bonds, Series 1992 (George R. Moscone Convention
Center)
$100.3 million
Aa3 Rating under review for downgrade
Lease Revenue Refunding Bonds, Series 2008-1 (LOC)
$72.6 million
Aa3 Rating under review for downgrade
Lease Revenue Refunding Bonds, Series 2008-2 (LOC)
$72.6 million
Aa3 Rating under review for downgrade
Lease Revenue Bonds, Series 2009 A (Branch Library Improvement Program)
$34.3 million
Aa3 Rating under review for downgrade
Lease Revenue Refunding Bonds, Series 2010-R1 (911 Information
and Communications System)
$22.3 million
Aa3 Rating under review for downgrade
Refunding Certificates of Participation, Series 2010A
$138.5 million
Aa3 Rating under review for downgrade
Refunding Certificates of Participation, Series 2011A (Moscone Center
South Refunding Project)
$23.1 million
Aa3 Rating under review for downgrade
Refunding Certificates of Participation, Series 2011B (Moscone Center
South Refunding Project)
$63.4 million
Aa3 Rating under review for downgrade
Certificates of Participation, Series 2001A (30 Van Ness Avenue
Property) and Series 2001B (Taxable)
$37.2 million
A1 Rating under review for downgrade
Certificates of Participation Series 2003 (Juvenile Hall Replacement Project)
$42.0 million
A1 Rating under review for downgrade
2004 Refunding Certificates of Participation (San Francisco Courthouse
Project)
$39.7 million
A1 Rating under review for downgrade
Lease Revenue Bonds, Series 2006 (Open Space Fund- Various
Park Projects)
$27.0 million
A1 Rating under review for downgrade
Certificates of Participation, Series 2007A (City Office Building
- Multiple Properties Project) and Taxable Series 2007B (City Office
Building - Multiple Properties Project)
$152.1 million
A1 Rating under review for downgrade
Lease Revenue Bonds, Series 2007A
$11.8 million
A1 Rating under review for downgrade
Lease Revenue Bonds, Series 2007A (Open Space Fund -- Various
Park Projects)
$42.4 million
A1 Rating under review for downgrade
Lease Revenue Bonds, Series 2008A
$12.0 million
A1 Rating under review for downgrade
Certificates of Participation, Series 2009 (Laguna Honda Hospital
Project)
$163.3 million
A1 Rating under review for downgrade
Certificates of Participation, Series 2009B (Multiple Capital Improvement
Projects)
$37.9 million
A1 Rating under review for downgrade
Certificates of Participation, Series 2009C (525 Golden Gate Avenue
SFPUC Office Project)
$38.1 million
A1 Rating under review for downgrade
Certificates of Participation, Series 2009D (525 Golden Gate Avenue
SFPUC Office Project) (Federally Taxable - Build America Bonds
Direct Payment)
$129.6 million
A1 Rating under review for downgrade
Lease Revenue Bonds, Series 2010A (Equipment Program)
$11.5 million
A1 Rating under review for downgrade
Tax Exempt Lease Revenue Commercial Paper Certificates of Participation,
Series 1 and T 1 (Bank Bond)
$0.0 million
A1 Rating under review for downgrade
Taxable Lease Revenue Commercial Paper Certificates of Participation,
Series 1-T (Bank Bond)
$1.0 million
A1 Rating under review for downgrade
Tax Exempt Lease Revenue Commercial Paper Certificates of Participation,
Series 2 and 2 T (Bank Bond)
$0.0 million
A1 Rating under review for downgrade
Taxable Lease Revenue Commercial Paper Certificates of Participation,
Series 2-T (Bank Bond)
$1.0 million
A1 Rating under review for downgrade
Lease Revenue Bonds, Series 2011A (Equipment Program)
$14.7 million
A1 Rating under review for downgrade
Lease Revenue Bonds, Series 2012A (Equipment Program)
$9.8 million
A1 Rating under review for downgrade
Certificates of Participation 2012A
$42.8 million
A1 Rating under review for downgrade
SAN LEANDRO
Taxable Pension Obligation Bonds, 2012
$18.3 million
A1 Rating under review for downgrade (Downgraded from Aa3/No Outlook)
SANTA ANA
Certificates of Participation City Hall Expansion Project
$12.5 million
Baa1 Rating under review for downgrade
SANTA BARBARA
Refunding Certificates of Participation (Municipal Improvement Program)
Series 2002
$6.3 million
Aa3 Rating under review for downgrade
SANTA CLARA
2002 Refunding Certificates of Participation, Series B
$33.5 million
Aa3 Rating under review for downgrade
2002 Certificates of Participation, Series A (City of Santa Clara
Central Park Library Project)
$25.0 million
Aa2 Rating under review for downgrade
Certificates of Participation, Series '97
$16.1 million
Aa2 Rating under review for downgrade
SANTA MARIA
2003 Refunding Lease Revenue Bonds
$23.5 million
A1 Rating under review for Downgrade
SANTA MONICA
General Obligation Bonds
$36.33 million
Aaa Rating under review for downgrade
Lease Revenue Bonds, Series 2002 (Public Safety Facility)
$17.3 million
Aa1 Rating under review for downgrade
Lease Revenue Bonds, Series 2004
$38.9 million
Aa1 Rating under review for downgrade
Lease Revenue Bonds, Series 2009 (Public Safety Facility Project)
$9.2 million
Aa1 Rating under review for downgrade
Lease Revenue Bonds, Series 2011A
$32.4 million
Aa1 Rating under review for downgrade
Lease Revenue Bonds, Series 2011B
$8.8 million
Aa1 Rating under review for downgrade
Lease Revenue Refunding Bonds, Series 2002
$10.5 million
Aa1 Rating under review for downgrade
SANTA ROSA
Issuer Rating
Aa1 Rating under review for downgrade
Pension Obligation Bonds, Series 2003B
$30.2 million
Aa3 Rating under review for downgrade (Downgraded from Aa2/No Outlook)
Certificates of Participation, (Building Acquisition Project),
Series 2007
$10.0 million
Aa3 Rating under review for downgrade
SUNNYVALE
Issuer Rating
Aaa Rating under review for downgrade
Certificates of Participation (City of Sunnyvale)
Aa1 Rating under review for downgrade
TORRANCE
Issuer Rating
Aa1 Rating under review for downgrade
Certificates of Participation, Series 2009
$18.9 million
Aa3 Rating under review for downgrade
Certificates of Participation, (Refinancing and Public Improvement
Project) Series 2004B
$23.9 million
Aa3 Rating under review for downgrade
Certificates of Participation Refunding, Torrance Public Financing
Authority (Police and Fire Station), Series 1998
$10.3 million
Aa3 Rating under review for downgrade
WOODLAND
Lease Revenue Bonds (2005 Capital Projects)
$20.4 million
A2 Rating under review for downgrade
Lease Revenue Bonds (Refunding and 2002 Capital Projects)
$33.2 million
A1 Rating under review for downgrade
CALIFORNIA STATEWIDE COMMUNITIES DEV. AUTH.
Taxable Pension Obligation Bonds, 2004 Series A-1 Bonds (Current
Interest Bonds)
$178.6 million
A1 Rating under review for downgrade (Downgraded from Aa3/No Outlook))
REGULATORY DISCLOSURES
The Global Scale Credit Ratings on this press release that are issued
by one of Moody's affiliates outside the EU are endorsed by Moody's
Investors Service Ltd., One Canada Square, Canary Wharf,
London E 14 5FA, UK, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that has issued a particular Credit Rating is available on www.moodys.com.
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
Information sources used to prepare each of the ratings are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, and confidential and proprietary Moody's
Investors Service information.
Moody's considers the quality of information available on the rated
entities, obligations or credits satisfactory for the purposes maintaining
these ratings.
Moody's adopts all necessary measures so that the information it
uses in assigning the ratings is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see the ratings disclosure page on www.moodys.com
for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%) and
for (B) further information regarding certain affiliations that may exist
between directors of MCO and rated entities as well as (C) the names of
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Please see Moody's Rating Symbols and Definitions on the Rating Process
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Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history.
The date on which some ratings were first released goes back to a time
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the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Eric S Hoffmann
Senior Vice President
Public Finance Group
Moody's Investors Service, Inc.
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Naomi Richman
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Moody's reviews ratings of 32 California cities; nine pension bonds downgraded
