LOS ANGELES - Mayor Eric Garcetti announced today that each of the "Big Three" credit rating agencies -- Fitch Ratings, Moody's Investors Service, and Standard & Poor's Rating Services -- have assigned the highest possible ratings to the next issue of the City's Tax and Revenue Anticipation Notes due to strong financial management practices and an improving large and diverse economy.
The City of Los Angeles plans to issue approximately $1.36 billion of Tax and Revenue Anticipation Notes (TRAN) to pre-pay the City's annual pension contributions and, as is routine, to alleviate short-term cash flow needs that occur early in the fiscal year, before many taxes and revenues have been received.
Fitch Ratings has assigned an 'F1+'. Moody's Investors Service has assigned a MIG 1. And Standard & Poor's Rating Services has assigned SP-1+. All are the highest short term ratings the city can receive.
Mayor Garcetti said that the credit ratings are attributed to fiscal policies that have resulted in reserves totaling $408.6 million (representing 8.4% of general fund revenues), exceeding the 5% reserve fund policy; maintaining the city workforce at Bradley-era levels despite a growing budget and instead investing in capital improvements; pension reforms that are expected to see city budget pension contributions peak in 2016-17 and decline thereafter; and other measures that would result in structural budget balance in 2018-19.
"We've earned our good credit by making tough fiscal decisions and being disciplined in how we budget," Mayor Garcetti said. "We must continue to pursue a course of fiscal discipline so that we bring structural balance to our budget, which translates into savings for taxpayers."
"The bond markets are recognizing that Los Angeles is firmly committed to sound fiscal policies that result in the lowest borrowing costs," said City Administrative Officer Miguel Santana, the City's top financial official.
The City anticipates saving more than $35 million through its pension contribution pre-payments due to a discount rate it receives from the pension systems for making its payment in July rather than on a bi-weekly basis.
Santana is meeting with major investors in California and the East Coast to update them on the City's financial and economic status and discuss the upcoming TRAN sale, tentatively set for June 26. The notes will mature in June 2015. Ramirez & Co. is Senior Manager of the notes.
Copies of the investor presentation and the Preliminary Official Statement are available at www.munios.com