Bloomberg Information
Santa Monica, California, had its outlook revised to damaging from secure and its Aaa issuer ranking affirmed by Moody’s Rankings on Tuesday.
Moody’s cited the town’s Sept. 9 passage of a
The town’s ongoing fiscal challenges, introduced on by a tepid restoration in tourism revenues post-COVID-19 and liabilities for little one sexual abuse claims stemming from a metropolis program, embody about $60 million in projected shortfalls over the following 5 years if administration takes no motion to right-size the finances, Moody’s mentioned.
The seashore metropolis of 91,500 had $353 million in complete excellent debt as of fiscal year-end June 30, 2024, Moody’s mentioned.
Its lease income bond scores have been affirmed at Aa1 and Aa2.
Affirmation of the scores displays Moody’s opinion that the fiscal misery decision “doesn’t point out a decline within the metropolis’s monetary place or total credit score high quality enough to warrant a ranking downgrade,” analysts wrote.
Administration is proactively formulating plans to realize structurally-balanced operations, but when the town is unable to efficiently shut finances shortfalls in fiscal 2026 and past, a ranking downgrade is probably going, Moody’s mentioned.
Moody’s pointed to the town’s substantial long-term strengths together with a robust economic system and favorable resident earnings ranges and working flexibility in affirming the Aaa ranking.
Moody’s attributed the revised outlook to the expectation the town will face ongoing budgetary challenges over the following 18 months, partly from elevated liabilities from ongoing sexual abuse settlement negotiations.
Claims of sexual abuse by Eric Uller, a former Santa Monica police dispatcher, have already price the town $229 million in settlement payouts and the town nonetheless faces 180 claims of sexual abuse by the identical worker, Santa Monica Metropolis Supervisor Oliver Chi instructed The Bond Purchaser
The town like many native governments and faculty districts in California is struggling to pay
The town had monetary reserves of greater than 62% of income as of fiscal 2024 year-end, regardless of a multi-year pattern of declining revenues from tourism for the reason that COVID-19 shut-downs in 2020, coupled with tapping reserves to pay the sexual abuse claims, Moody’s mentioned.
The Aa1 ranking on the town’s Collection 2018, 2017 and 2015 lease income bonds is one notch decrease than the town’s Aaa issuer ranking, reflecting the usual California abatement lease authorized construction and leased property that Moody’s mentioned it views as “extra important.” Leased property for these bonds embody public security amenities, a metropolis companies constructing, and a civic middle parking storage, respectively.
The Aa2 ranking on the town’s Collection 2021A lease income bonds is 2 notches decrease than the issuer ranking, reflecting leased property Moody’s mentioned it views as “much less important.” Leased property for the Collection 2021A bonds embody a standalone parking facility.
The damaging outlook could possibly be eliminated it the town efficiently implements plans to shut the projected finances baps in fiscal 2026 and past, whereas sustaining sturdy reserve ranges, Moody’s mentioned. On the flip aspect, if the town experiences additional declines in its fund steadiness ratio to lower than 50%, tourism revenues proceed to lag finances expectations, and its long-term liabilities ratio balloons to over 350% of income, Moody’s might downgrade the scores.
The town has AAA scores with secure outlooks from Fitch Rankings and S&P World Rankings.
