Moody’s Investors Service this week downgraded the Sierra Kings Hospital District’s general obligation bonds to Baa3 from Baa1 ahead of a planned $4 million sale of GO bonds.
The hospital district is centered in the San Joaquin Valley town of Reedley, about 30 miles southeast of Fresno.
“The downgrade reflects persistent district operating deficits over the last several years,” Moody’s analyst Michael Wertz said in a report. “These deficits have resulted in the district having a very thin level of cash and a weak overall fiscal position.”
The action affects about $20 million of debt, including the new issue.
The small agricultural community’s economy has been hit hard by the economic downturn. Unemployment in Fresno County, where the health care district is located, rose to 15.2% in June from 15% in May.
“The economic slowdown is particularly troublesome for the district since its residents already had higher unemployment and lower incomes than the rest of the state even prior to the downturn,” Wertz said.
The district’s assessed valuations grew at an average rate of about 9% during the housing boom, but growth fell to a little more than half that pace in fiscal 2009.
“Given the severity of the housing downturn in this segment of the state, a decline in the 2010 assessed valuation would not be surprising,” Wertz said.
The hospital has also had operating deficits in recent years, with losses growing from $215,000 in fiscal 2007 to $1.6 million in fiscal 2009. Wertz said the district lost customers while making capital improvements, and California has cut Medi-Cal reimbursements. Expenses have continued to rise due to a shortage of doctors and nurses in the region. The district expects another deficit in 2010.
“The recent spate of deficits has severely weakened the district’s cash position,” Wertz said. The district had just 8 days cash on hand at the end of fiscal 2009.
