Moody's: Long Beach fiscal move 'positive'

When Moody's Investors Service released its Weekly Credit Outlook newsletter Monday, Long Beach officials got a pleasant surprise: a prominent "credit positive" article detailing the City Council's decision last week to declare a fiscal emergency.

"We're obviously super-excited," City Manager Jack Schnirman said. "It doesn't change our rating, but it's like saying, 'You're on the right track, kid.' "

Moody's said declaring a fiscal crisis gives Schnirman greater control over the city's operations, but it emphasized the city must keep its contractual agreements, such as paying down its debt service.

Long Beach faces $48 million in general obligation debt and ended the 2010-11 fiscal year with $107,000 in its general fund, down from $7.5 million in 2008. The prior administration borrowed $1 million at the end of 2011 to make payroll. In December, Moody's downgraded the city's debt five levels from A1 to Baa3.

"In 2011, Moody's did 10,000 total ratings," Schnirman said. "Only 17 were downgrades of four levels or higher."

Moody's will reevaluate Long Beach's rating in March, 90 days after the initial downgrade. If fiscal stability improves, the city could be taken off the watch list. If not, it could be downgraded further, said Robert Weber, Moody's head analyst for Long Beach.

"The development we saw last week is one step in the right direction for the city," Weber said, adding that Moody's does not positively or negatively endorse these actions.

"They're saying, 'Thus far, the actions that you've taken are positive,' " Schnirman said. "In other words, we could still screw it up. But we're determined to do the right thing."