Long Beach avoids a junk-bond credit rating

The City of Long Beach dodged a junk-bond credit rating on Tuesday, after Moody’s Investors Service announced that the city was no longer in jeopardy of a further downgrade.

In December, the agency downgraded Long Beach’s credit rating from A1 to Baa3 — a step above junk bond status — after the city borrowed millions to make up for a staggering cash-flow shortfall and exorbitant contractual payouts to a number of retiring police officials.

Moody’s announcement that the city is no longer under review for a further downgrade came shortly after the city adopted an $87.9 million budget, agreed to a number of concessions with its largest union and made plans to issue up to $15 million in deficit-reduction serial bonds.

“In less than six months, we’ve stopped the bleeding, cut spending, cut overtime, shrank the workforce, passed a budget that eliminates the city’s annual operating deficit — and now Moody’s has confirmed that we are on the road to recovery,” City Manager Jack Schnirman said in a statement.

Although Moody’s has placed the city on a “negative” credit-rating outlook, its Baa3 rating on $48.3 million in outstanding general obligation debt will not change as it contends with a projected $10.25 million deficit.

Long Beach declared a fiscal crisis earlier this year, and Schnirman said that a tax increase and layoffs were unavoidable as the city attempted to deliver a balanced budget before June 30, and attempted to avoid another credit-rating downgrade that would have impacted borrowing fees paid by the city and its taxpayers.

“One of the mains concerns when we were going through the budget … was that Moody’s was watching, and I think we delivered and Moody’s held true to their word,” said Councilman Scott Mandel. “I think it pretty much confirms that we’re on the right track and doing what needs to be done — it reinforces our plan to bring the city to fiscal stability.”