Moody's Investors Service has improved the outlook for Long Beach from stable to positive and affirmed a Baa3 rating on the city's $8.2 million general obligation serial bonds.
The credit rating agency assigned the rating to $8.2 million in serial bonds expected to be sold June 12, the report released Monday said. Proceeds from the current issue will be used to help pay off a $13.87 million accumulative deficit through June 2012, which city officials have said they inherited.
Moody's officials said they affirmed the rating to reflect significant improvement in management practices and budgeting in the past two years, which will result in improved reserve levels and surplus operations in fiscal 2013 for the first time in five years. The rating also factors in the city's sizable tax base with above-average wealth levels and a manageable debt burden, the report said. According to Moody's, obligations rated Baa "are subject to moderate credit risk. They are considered medium grade and as such may possess certain speculative characteristics."
"This is the latest in a series of positive reports from Moody's, and we are extremely pleased to see the improved ratings outlook as we continue to implement our long-term fiscal recovery plan," City Council President Scott J. Mandel said.
The city's rating could drop due to several factors: failure to execute new policies and procedures, reduced reserves following the issuance of deficit reduction bonds, and failure to implement structural changes to water and sewer funds resulting in further declines. The issuance of deficit reduction bonds should eliminate the need for short-term cash flow notes, reducing market access risk, the report said.
The rating could increase based on the city's demonstrated ability to structurally balance budgets and continue improvement in reserves following issuance of bonds, the report said.