LOS ANGELES — Standard & Poor's revised its outlook for Los Angeles to positive from stable Sept. 2.
Standard & Poor's also affirmed its AA-minus underlying rating for Los Angeles general obligation bonds, A-plus long-term underlying rating on the city's outstanding appropriation-backed debt, and A-plus rating on Municipal Improvement Corporation of Los Angeles lease revenue bonds.
The action comes ahead of the city's plans to issue $81 million in MICLA lease revenue bonds on Sept. 10.
"The positive outlook reflects our view of the city's improved economic metrics, including unemployment, which is below 10% and continues to fall, and the city's improving financial position, as demonstrated by a large surplus in fiscal 2013," said Standard & Poor's credit analyst Jen Hansen.
The city plans to issue the MICLA bonds in two tranches with $29.6 million in Series A and $51.4 million in Series B.
Fitch affirmed its A-plus rating and stable outlook for the MICLA bonds Aug. 28 and affirmed AA-minus ratings on the city's $992 million in GO debt.
The MICLA lease revenue bonds are secured solely by the city's covenant to budget and appropriate lease rental payments for use and occupancy of various facilities and equipment, subject to abatement.
The GO bonds are secured by ad valorem property taxes.
S&P said the ratings reflect analysts' views of the city as having very strong liquidity, very strong management, a strong economy, strong budgetary flexibility, weak budgetary performance and weak debt and contingent liabilities position.
Fitch based its ratings on the city's stature as a "commercial and cultural center of a very large, diverse economy that is benefiting from revenue and property market improvements, despite an unemployment rate which remains stubbornly high."
Kroll Bond Rating Agency, which rated LA's GO bonds for the first time in August, assigning them its AA ratings, rated the MICLA bonds AA-minus with a stable outlook.
Kroll said the lower MICLA rating was based on lack of construction risk, sufficient property and casualty insurance and rental interruption insurance for insured risks, a seismic analysis which indicates moderate risk of damage from earthquake, essentiality of the leased projects to city operations and the strong financial condition of the city, as evidenced by increasing reserve levels and strong liquidity.
