ALAMEDA, Calif. — Fitch Ratings washed its hands of the troubled Bell, Calif, on Monday, withdrawing its ratings after issuing a final downgrade to the city’s already junk-rated debt.
“The withdrawals are due to city management’s lack of response to Fitch’s attempts to gain the information needed to continue to accurately assess the city’s credit quality,” the rating agency said.
Bell, a blue-collar community near Los Angeles, has been under an investigative microscope since the Los Angeles Times revealed in July that its then-city administrator was making almost $800,000 a year.
Subsequent examinations of Bell’s unusual financial practices exposed other unusually high salaries and a state controller’s audit determined that the city had levied a higher-than-permitted property tax rate.
Fitch downgraded $50 million of outstanding Bell general obligation bonds to B from BB on Monday, dropped approximately $7.5 million of Bell Public Financing Authority taxable pension obligation bonds to B-minus from BB-minus, and then withdrew the ratings altogether, saying it will no longer provide coverage of Bell.
“The downgrades are based on publicly available information that indicates an increase in near-term credit risk,” Fitch’s release said.
Those risks include an unrated, $35 million privately placed deal that will mature on Nov. 1, unless the city refinances the debt or the bondholder grants an extension.
“Fitch believes the city will have difficulty refinancing this obligation given recent revelations of weak city management and likely financial strain,” the agency said.
State Attorney General Jerry Brown has also filed a civil lawsuit against City Council members and former city administrators accused of conspiring to collect excessive salaries.
“The lawsuit and an ongoing criminal investigation could pressure what Fitch believes are already weakened city finances,” according to Fitch.
Standard & Poor’s dropped its ratings on Bell bonds to speculative grade in August. Moody’s Investors Service does not rate the city’s debt.