S&P Cuts Town’s COPs

Standard & Poor’s cut the underlying rating on Corte Madera’s certificates of participation to BBB-plus from A.

“The downgrade reflects our view of the town’s continued deficit spending in the general fund,” analyst Misty Newland wrote in a report. The Marin County town of 9,400 has experienced a rapid expansion of its general fund budget deficits from 4.2% of spending in fiscal 2007 to 12.8% in fiscal 2009, she said.

“While the town has implemented budget reductions for fiscal 2010, it continues to project deficit general fund balances for the end of the year,” the rating report said.

Standard & Poor’s said the town pools cash and spending from all funds when it budgets, instead of basing budgets on the amount of cash available in each individual fund. That’s led to negative general fund balances, as well as a rapid increase in transfers out of the general fund.

“We believe the town’s budgeting practices may mask budget pressures and make it difficult for the town to match appropriate revenues and expenditures going forward to produce meaningful, long-term forecasting,” Newland wrote.

Despite its budget woes, the town also possesses strengths that may help it overcome its deficits.

Corte Madera, which is about nine miles north of San Francisco, is a hub for retail activity in wealthy Marin County, and median household incomes are more than 80% higher than the national average.

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