LOS ANGELES — Vallejo, Calif. received a ratings boost from S&P Global Ratings partly based on anticipation that a temporary sales tax measure could be made permanent in November.
S&P Global raised its underlying rating to BBB from BBB-minus on Vallejo, Calif. series 1999 certificates of participation in an Oct. 6 ratings report.
"The raised rating reflects our view of the city's improving economic and general fund performance, which is tempered by our opinion of the ongoing challenges to maintaining a structurally balanced budget," said S&P Global Ratings credit analyst Sarah Sullivant.
The outlook is positive.
Voters approved Measure B, a 1% temporary sales tax, in November 2011, increasing the sales tax to 8.375% from 7.375%. It is estimated that Measure B will raise approximately $13,655,000 in the current fiscal year 2015-16, according to the city's website.
A poll conducted by the city found that 76% of residents support making the 1% sales tax permanent in November.
The rating further reflects S&P's opinion of the city of Vallejo's adequate economy, weak management, adequate budgetary performance, adequate budgetary flexibility, strong liquidity, adequate debt and contingent liability position, and strong institutional framework score.
"The positive outlook reflects our anticipation that there is at least a one-in-three chance that the city's ongoing budgetary imbalance could be resolved by voter approval in November 2016 of a ballot measure that would make recent sales tax increases permanent," S&P said in the report.
Vallejo emerged from Chapter 9 bankruptcy in 2008.