Moody's Is Latest Ratings Agency To Confirm San Diego's Recovery

SAN FRANCISCO - Moody's Investors Service upgraded San Diego's general obligation bond rating to A2 from A3 last week, becoming the final of the three major credit rating agencies to reward the city's recovery from financial crisis this year.

Moody's also upgraded most of the city's lease-backed debt to Baa1 from Baa2. It raised the city's taxable Jack Murphy Stadium debt to Baa2 from Baa3.

"The rating upgrade reflects notable, and now confirmed, improvement in the city's financial position - although significant financial pressures remain - and the resolution of the ongoing investigations that had hampered the city's financial reporting and contributed to a general environment of crisis and uncertainty," said Moody's analyst Kevork Khrimian in a report.

San Diego has been locked out of the public bond market for the past four years, as California's second-largest city worked to reform its financial management in the wake of a pension scandal.

The Securities and Exchange Commission sanctioned the city for securities fraud in 2006 after it failed to disclose a $1 billion-plus pension deficit to bond investors, and earlier this year the commission charged five former top officials with fraud for allegedly concealing the liability.

Since installing political and financial managers in early 2006, the city has revamped its disclosure practices and audit procedures. It has completed four long-overdue Comprehensive Annual Financial Reports in the past two years and expects to finish its final overdue report by the end of this year.

Mayor Jerry Sanders - a former police chief who was elected on a promise to clean up City Hall after the pension scandal - has slashed jobs and renegotiated pension and retirement health benefit packages to balance the budget. Voters reelected him in June after he campaigned on his success in restoring the city's creditworthiness.

Fitch Ratings in March revised its outlook on San Diego's BBB-plus GO rating to positive from negative. Standard & Poor's in May reinstated the city's rating at A with a positive outlook.

San Diego plans to return to the public bond market in January to refinance about $100 million of water revenue bonds. It will follow that issue with a refunding of as much as $750 million of sewer revenue bonds. It plans to begin issuing new-money bonds for the two systems shortly thereafter.

"The first half of next year will be an extremely busy season," said director of debt management Lakshmi Kommi.

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