LOS ANGELES — Oxnard, Calif.'s issuer credit rating received a downgrade from Standard & Poor's, to A-plus from AA-minus.
"The downgrade reflects that the 2016 budget identified significant financial challenges, as well as serious deficiencies in management's oversight of financial and business practices," Standard & Poor's credit analyst Michael Stock said.
S&P also lowered its rating on the City of Oxnard Financing Authority's lease revenue project and refunding bonds series 2014 to A from A-plus. The authority's 2003B and 2006 bonds maintained a AAA/A-1 rating based on letters of credit provided by MUFG Union Bank.
The ratings were removed from CreditWatch with negative implications assigned Sept. 11, but analysts assigned a negative outlook.
"The negative outlook reflects our belief that Oxnard's financial position is vulnerable to future cost increases and revenue constraints, and that there is at least a one-in-three chance that we could lower the rating," analyst Sarah Sullivant wrote. "Although cost reductions have been approved and the fiscal 2016 budget calls for a return to balanced operations, we believe that certain budget assumptions might be difficult to achieve and that the city will likely struggle to achieve balanced results."
Analysts also said that if Oxnard continues to draw down its available reserves to levels below weak, they would likely lower the rating. And if the city's new auditor makes a material financial restatement, there could be a multiple-notch downgrade, the rating agency said.
The city of 205,000 is about 50 miles north of Los Angeles on the Pacific coast.
City officials initiated an independent review of key city departments including the city manager's office and finance department in September 2014 that indicated the city was headed for insolvency unless it acted immediately, according to S&P.
With changes in key management personnel, S&P said Oxnard is "embracing a higher degree of operational transparency and working with all city departments to develop a more sustainable financial model."
