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Overcast Long Beach lifts fiscal crisis
Moody’s says city's credit rating is stable
Saying that Long Beach has avoided the fate of Detroit, the Long Beach City Council voted unanimously on Tuesday to lift its declaration of a fiscal crisis, after Moody’s Investors Service revised its credit rating outlook last week from negative to stable.
More than a year after the city declared the crisis amid a multi-million-dollar deficit and a staggering cash-flow shortfall, Moody’s affirmed a Baa3 rating on the city’s $42 million in general-obligation debt on Aug. 30.
City officials said that the Moody’s report cites the current administration’s “improved financial controls and policies leading to two balanced budgets” and its reduction of the city’s overall debt level by $6 million as reasons for the positive report.
“It means that they believe we’re moving in the right direction,” City Manager Jack Schnirman said.
The city declared a fiscal crisis in February 2012, after it uncovered what was initially a projected $10.25 million deficit. Two months earlier, Moody’s had downgraded the city’s rating an unprecedented five levels, from A1 to Baa3, just one step above junk bond status, reflecting the city’s deteriorating financial position since 2008.
Having reaffirmed Long Beach’s A1 rating just months before the downgrade, the agency said that it conducted a review of the earlier rating due to insufficient information and “severe, negative discrepancies” it said the previous Republican-led administration reported.
Schnirman also pointed out two audits that illustrated the city’s financial decline, including a scathing report in July by the state comptroller’s office. It concluded that the prior administration enacted budgets that made unrealistic estimates of revenue and expenditures and created an $18 million multi-year deficit, while exhausting $21 million in reserve funds, which led the current administration to declare a fiscal crisis.
That declaration allowed Schnirman to rein in spending and implement cost controls to avoid another downgrade, which could have impacted borrowing fees paid by the city and its residents.
