Stockton Teeters on Rating Downslope

Moody’s Investors Service Tuesday placed the foreclosure-hammered city of Stockton on watch list for possible downgrade.

The action affects the city’s A2 issuer rating, the A3 rating on the city’s 2007 taxable pension obligation bonds, and its Baa1 rating on 2006 lease revenue refunding bonds.

The city of 287,000, about 80 miles east of San Francisco and 50 miles south of Sacramento, is among the hardest hit in California’s real-estate bust.

According to Moody’s, Stockton faces a $28 million structural deficit for fiscal 2010 that will require a 15% spending cut.

“This level of reduction is made even more difficult by existing labor agreements which, absent negotiated concessions, would in fact increase the deficit,” the Moody’s release said.

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