Moody’s Investors Service this week affirmed its A2 issuer credit rating on Stockton and removed the city’s from its watch list.
The agency also assigned a MIG-1 rating to the city’s $32.2 million of 2009 tax and revenue anticipation notes, affirmed the A3 rating on its pension bonds, and affirmed the Baa1 rating on its lease-backed debt.
“The affirmation of the city’s long-term ratings reflects its realistic budget for fiscal 2010, following upon satisfactory financial performance in fiscal 2009,” Moody’s analyst Dari Barzel said in a report. “The city has demonstrated its commitment to controlling expenditures, making the difficult decisions required to do so.”
Stockton, population 290,000, has been hit harder than most California cities by the housing bust and recession. Its unemployment rate rose to 18.7% in June.
The severity of the downturn and local budget problems led several media outlets to report earlier this year that Stockton was considering bankruptcy. The city denied the report and vowed to close a $28 million deficit in its roughly $190 million general fund.
“Fiscal 2009 was a very difficult year for the city, with substantial decreases in almost all revenue categories,” Moody’s said. “Despite the city’s slow response to its weakened revenues, it was able to cut expenditures sufficiently to result in positive operations.”
Despite plaudits for the city’s budget balance efforts, Moody’s said Stockton still faces bleak economic conditions and limited reserves.
“The ratings continue to reflect the city’s still very narrow general fund financial position,” the agency said. “The city’s severely challenged real estate market and economy render improvement particularly difficult.”
Stockton had an unrestricted fund balance of $12.4 million, or 6.6% of revenue, at the end of fiscal 2009.
