Mayor and Members of the City Council:
I regret to inform you that Moody’s Investors Service, which has rated past debt issues of the City of Richmond, has downgraded the City’s issuer rating to Baa1 from
A1, pension bonds to Baa2 from A2, and placed the city and wastewater enterprise ratings under review for possible downgrade. The attached report provides the rationale for this downgrade. In particular, Moody’s has identified the city's seriously weakened financial position over the past few years, evidenced by negative available operating fund balances. They point out that, while the tax base is large and grew in 2015, total assessed valuation (AV) remains well below pre-recession levels.
In my mind, the downgrade does not come as a surprise, and, in fact, I expected that this could have happened several years ago. What the Moody’s report describes is what I believe to be a good summary of measures that should be taken by the City to address its financial issues (all of which have been discussed by the Council):
WHAT COULD MAKE THE RATING GO UP
- Strong management action to bring city operations into structural balance
- Steady and strong growth in the tax base
- Favorable resolution of contingent liabilities
WHAT COULD MAKE THE RATING GO DOWN
- Further deterioration of financial position and liquidity through continued deficit spending
- Decline in the tax base
Staff is currently working hard to deliver a balanced FY 2015-16 operating budget to the City Council that we can recommend for adoption, consistent with the measures described above.
Please feel free to contact me if you have any questions or require any additional information.
For the Moody’s Report, see https://www.moodys.com/research/Moodys-downgrades-Richmond-CA-issuer-rating-to-Baa1-from-A1--PR_325368.
City of Richmond
450 Civic Center Plaza
Richmond, California 94804