Long Beach will have an improved bond rating, as City Council members approved the borrowing of $16 million in bonds for capital improvement projects.
Moody’s Investment Services upgraded the city’s bond rating from Baa2 to Baa1. The bond rating applies to $16 million in public improvement bonds and the credit increase is expected to save the city $200,000. The city is separately applying for $21 million in bond anticipation notes. This is the eighth consecutive positive credit action for Long Beach.
The city’s bond rating was upgraded Friday with a positive outlook for $66 million in long-term general obligation debt that is composed of infrastructure improvements, deficit financing, police arbitration pay raises and separation pay.
Moody’s credited the city with an “improved but still narrow financial position following the issuance of deficit reduction bonds in fiscal 2014 . . . and an elevated but manageable debt burden.”
Long Beach officials were pleased with the improvement.
“This shows continued progress over the last year,” Long Beach City Manager Jack Schnirman said. “Long Beach is back in the black. Our reserve fund is growing and available for emergencies to be used prudently and judiciously.”
The city is using $15 million of the $21 million in bond anticipation notes to pay back a judgment against the city from the Superblock property along the boardwalk. A judge ruled the city undervalued the property in 2006 during eminent domain proceedings by $11 million. The city does not own the land and the judgment is not related to the current proposed condo development by iStar Financial.
The city’s bond rating was previously dropped five levels in 2011 to Baa3, a step above junk bond status, after excessive borrowing of reserves and spending by the previous City Council.
Reserves are expected to increase this year to $7 million after the city posted its first positive reserves of $5 million last year. Reserves have grown during the last two years through reimbursements from the Federal Emergency Management Agency for storm repairs after superstorm Sandy walloped the city more than three years ago, Schnirman said.
“Having been part of this administration from the beginning, it is extremely rewarding to see our tough choices and positive improvements recognized, and the city rewarded for them,” Long Beach City Councilman Scott Mandel said.
Moody’s said the city’s bond rating can further increase to A3 if elected officials continue to pass balanced budgets and improve liquidity and reserves.
The city has reached 18.5 percent of its debt ceiling, and the city is paying back 89 percent of its long-term debt within 10 years. The bond rating could be lowered if the city reduces its reserves or fails to make changes to its water or sewer funds, resulting in further declines.
“Another ratings upgrade from Moody’s clearly validates this administration’s commitment to strong fiscal management,” City Council vice president Anthony Eramo said. “While this is certainly another major step forward, we still have much work left to do as we continue along the road to recovery.”