Standard & Poor’s downgraded Yolo County’s certificates of participation to BBB-plus from A-minus.
The move affects $3.5 million of outstanding COPs issued in 1998. The outlook on the debt is negative. The California county has about $20 million of long-term debt, according to its most recent comprehensive annual financial report.
“The rating change reflects our view of the county’s history of volatile general fund performance and budget instability,” said Standard & Poor’s analyst Misty Newland.
She said the county’s general fund had a deficit of 11% in fiscal 2008, and officials expect the county to post deficits in several other governmental funds in fiscal 2009. They expect property tax revenue to fall 4% in the upcoming year, creating another challenging budget year.
“Although management implemented some cost-saving measures during fiscal 2009, it is our understanding from management that achieving structural balance will be a multiyear process and that budget gaps will likely persist beyond fiscal 2010,” Newland said.
California counties have been hard hit by both the shrinking economy, which hurts local tax collections, and the state’s shrinking budget, due to heavy reliance on state aid. Those governments that have been unable or unwilling to offset declining revenue with spending cuts are facing ratings pressures.
Yolo County joins Sacramento, Mendocino and Tulare counties on the list of California counties that have been downgraded by at least one of the major rating agencies in the past three months. Standard & Poor’s also put a negative outlook on the debt of Los Angeles County, the nation’s largest, earlier this month.