LOS ANGELES — Moody’s Investors Service upgraded Los Angeles’ general obligation bond rating to Aa2 from Aa3 Wednesday while affirming lower ratings   on the city’s general fund-backed bonds, and assigning all of the city’s bonds a stable outlook.

Moody’s analysts had placed the city’s GO rating on review for upgrade on Oct. 9, 2012 as part of their review of 56 California credits.

At the time the agency also downgraded the city’s $70 million in judgment obligation bonds to A2 from A1.

Moody’s said last year it plans to draw more of a distinction between local California GO debt, which is backed by voter-approved property taxes, and obligations that are paid from general fund revenues.

“The affirmation of the city’s other ratings, and the resulting widened “notching” between the city’s GO and General Fund-backed obligation ratings, reflects both the difficult operating environment for California cities generally and the specific challenges that Los Angeles faces in balancing its General Fund budget,” according to the Moody’s report.

Despite significant general fund budget cuts in recent years, Los Angeles continues to have a substantial structural deficit, the report said.

The upgrade review for Los Angeles’ GO bonds were only one of two possible positive outcomes in the October report. The rating agency also put San Francisco’s GO bonds on review for upgrade at the time citing growth in both cities assessed valuations.

Despite the last few years’ extreme housing market volatility, the assessed valuation of Los Angeles’ property tax base has proven quite stable and is now on an upward track, according to the report.

“The city’s direct GO debt burden on this property tax is low, and the debt is structured conservatively with 20-year final maturities and level annual retirement of principle,” analysts said. “Absent additional borrowing, the tax rate to support the city’s GO bonds would decline over time even in the absence of additional assessed valuation growth.”

Today, the rating agency affirmed at A2 the city’s unsecured, general fund-backed obligation bonds, lease revenue bonds and certificates of participation. The city’s equipment lease-backed LRBs and COPs were affirmed at A3.

The report completes the rating agency’s review of Los Angeles’ ratings, the report said.

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