Massive reduction in crude prices hits Kern County's property tax revenues.

LOS ANGELES - Moody's Investors Service placed Kern County, Calif.'s Series 2009 certificates of participation under review for a possible downgrade, affecting approximately $86 million in debt with an A1 rating.

The move comes after the county's Board of Supervisors voted to declare a fiscal emergency on Jan. 27, anticipating a shortfall because one-third of the county's property tax revenues come from oil companies.

The county is anticipating a $60 million reduction in property tax revenue for fiscal 2015-16 as a result of the steep drop in oil prices, Nancy Lawson, the county's budget director told The Bond Buyer for an earlier article.

If the board did not take action, it would be facing a $27 million deficit in its $781 million general fund budget, she said.

"The county's discretionary revenues are highly dependent on the oil industry," Moody's analysts Greg Lipitz and Eric Hoffman wrote. "As a result of the slump in oil prices, the county has recently projected a 43% decline in oil property assessed valuations."

This declaration enables the county to access reserves at mid-year if necessary, rather than at the time of budget adoption, and address staffing levels in the county's fire department. The county also approved other actions that it estimates will narrow the $27 million general fund budget gap to $6.6 million, Moody's analysts said.

"While the county budgeted an increase in general fund balance for 2015 and to date reports positive budget to actual results, fiscal 2016 could see a material weakening of its balance sheet, to a level inconsistent with the A1 COP rating," analysts said.

In addition to the Kern County economy's concentration in the oil industry, analysts said the county's credit quality is challenged by an above-average unfunded pension obligation and a below average socioeconomic profile.

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