ALAMEDA, Calif. — Fitch Ratings dropped its ratings on Bell to junk Tuesday, as the small Southern California city continued to reel from its unusual financial practices, which included paying a former city administrator almost $800,000 a year.
Fitch downgraded Bell's $50 million of outstanding general obligation bonds to BB from A-plus, and downgraded $7.5 million of Bell Public Financing Authority taxable pension obligation bonds to BB-minus from A-plus.
Standard & Poor's dropped Bell to speculative grade Aug. 10. Moody's Investors Service does not rate any Bell bonds.
Last month's revelation that city administrator Robert Rizzo was paid almost $800,000 a year — plus very generous benefits — put the city and its finances under intense scrutiny.
A subsequent audit prompted California Controller John Chiang to declare on Friday that Bell has been levying a higher-than-permitted property tax rate since 2007.
Fitch cited "management weakness" for the downgrade, noting that the city faces a $35 million bullet maturity this November on a taxable lease-revenue deal to finance a development plan that failed to materialize.
"Given the large bullet maturity and change in the city's credit profile, Fitch believes it will now be very difficult for the city to refinance this obligation," the agency said in a statement issued Tuesday.
Fitch also noted that the state controller's office determined that Bell's special property tax to fund retirement obligations is capped at 1984 levels.
That forced the city to roll back the levy, which is pledged toward the city's pension bonds.
"With this, Bell's general fund will have to contribute a larger share to annual pension payment, pressuring current operations during an already strained period," Fitch said.
Fitch placed Bell on negative rating watch.
