Standard & Poor’s continued to upgrade California counties this week, boosting San Mateo, Santa Barbara, Marin and San Diego counties.
The agency raised its issuer credit ratings on San Mateo and San Diego counties to AAA from AA-plus. It upgraded Marin County’s pension obligation bonds and Santa Barbara County’s appropriation-backed debt to AA-plus from AA.
Standard & Poor’s, like Moody’s Investors Service and Fitch Ratings, has been under intense pressure from politicians, such as U.S. House Financial Services Committee chairman Barney Frank and California Treasurer Bill Lockyer, to upgrade local government credit ratings to reflect less stringent standards used for corporate borrowers.
Fitch and Moody’s have agreed to move to the same scales as corporates, but earlier this week they decided to delay the moves until the current financial crisis eases. Standard & Poor’s says that it has always had a single scale, but earlier this year it decided to “re-benchmark” credits to reflect updated default data. It upgraded 604 in the second quarter, compared to an average of 87 per quarter since 1986.
Standard & Poor’s says credit quality is improving amid the deepest financial crisis and worst housing recession since the Great Depression.
“This action marks the first time that credit quality among California’s 58 counties has reached this exceptional level of creditworthiness,” Standard & Poor’s said in a report. “The upgrades reflect the recognition that these counties are able to weather many uncertainties, including reliance on the state of California for funding.”
The housing market meltdown has hit the real economy hard in California. The state’s jobless rate surged to 7.7% in August from 5.5% a year earlier. The state recently passed a budget 85 days late after fighting for months over how to close a $15 billion budget gap. State fiscal officials already acknowledge that the budget will be billions in the red this year. State aid is among the largest sources of revenue for California counties.
