Tags: US | LA | City | Budget

Moody's Cuts LA Credit Rating, Warns of More Downgrades

Wednesday, 07 Apr 2010 02:36 PM

The Los Angeles City Council and employee unions are investigating whether Mayor Antonio Villaraigosa has the authority to shut down municipal services two days a week.

The city's financial crisis led Moody's Investors Service to downgrade the city's credit rating and warn that the city risks further downgrades.

Moody’s cut L.A.’s general-obligation bond debt rating to Aa3 from Aa2. That puts the city at the lower end of what Moody’s considers a “high quality” security. A weaker credit grade typically means higher borrowing costs.

Moody’s said its ratings cut “primarily reflects the continued erosion of the city's historically better-than-average willingness and ability to quickly rebalance its budget mid-year.”

The downgrade also “partly reflects the likelihood that the city's general fund reserves at the end of the current fiscal year could be materially weaker than we had previously expected, now that an expected transfer from the Department of Water and Power may be reduced.”

Meanwhile, a spokesman for Councilman Bernard Parks says the council may have to approve the plan to curtail several services starting Monday. Services that don't generate revenue — such as libraries, parks and community centers — would be affected.

The mayor's office did not immediately respond to a request for comment.

The mayor announced his cutback plan Tuesday after a city controller report warned the city would run out of cash by May 5.

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The Los Angeles City Council and employee unions are investigating whether Mayor Antonio Villaraigosa has the authority to shut down municipal services two days a week. The city's financial crisis led Moody's Investors Service to downgradethe city's credit rating and warn...
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