Kern County's property tax revenues hit hard by massive drop in crude oil prices.

LOS ANGELES — Standard & Poor's revised its outlook on Kern County, Calif.'s A-plus rated certificates of participation and pension obligation bonds to negative from stable after the oil-rich county declared a fiscal emergency based on the falloff in oil prices.

The county's Board of Supervisors voted to declare a fiscal emergency on Jan. 27 with a $27 million budget shortfall projected for fiscal 2016. Officials called the move a proactive measure that authorizes the county to use its $40 million general fund reserve to cover the shortfall.

The negative outlook reflects our view of the county's projected shortfall that is primarily due to falling oil prices, said Standard & Poor's credit analyst Li Yang.

"Management indicates the declaration of fiscal emergency is purely a proactive measure and that there are no plans or discussions of entering into bankruptcy in the foreseeable future," Yang said. "As a result, we do not consider the declaration of fiscal emergency itself as a substantial credit weakness."

The county will need to address its projected operating shortfalls in light of the declining oil-related assessed property valuations in order to maintain its current financial position, Yang said.

Although the fiscal emergency allows the county to potentially reduce the number of firefighters, he said the county does not plan to reduce service levels.

The third largest county in California, Kern County encompasses roughly 8,073 square miles and has a population of 884,923. Located in the southern part of the Central Valley, Yang said it is also the largest oil producer in the continental U.S.

The county has $104.5 million in outstanding COPs and $323 million in outstanding POBs, according to its comprehensive audited financial report for the fiscal year ended June 30, 2014.

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