Moody’s lauds Long Beach for fiscal crisis declaration

A week after the City Council declared a fiscal crisis, Moody’s Investors Service, the credit agency that knocked Long Beach’s bond rating down five levels to near-junk-bond status, praised city officials on Tuesday and said that the resolution is a first step toward financial recovery.

In its Feb. 13 Weekly Credit Outlook newsletter, the agency called the move a “credit positive” because it prevents the city from forgoing the payment of contractual agreements, including debt service, and gives City Manager Jack Schnirman greater control over the city’s financial operations while implementing budgetary initiatives to further ensure fiscal stability.

In downgrading the city’s finances in December, Moody’s said that it had placed Long Beach under review for a potential further downgrade due in part to insufficient information provided by the previous administration and negative discrepancies between the city’s projections of its reserve and cash positions last August.

“I’m thrilled that they’re working with us and allowing us to regain our footing despite what was represented to them in the past by prior administrations,” said Councilman Scott Mandel. “I’m glad that they’re recognizing that this is a new administration that is committed to openly and honestly working with them, and earning our ratings.”

The city is saddled with $48 million in general-obligation debt, and its declaration of a fiscal crisis, Moody’s said, follows years of weakening finances in which several of the city’s departments “have chronically spent beyond their budgets.” For example, the agency said, in fiscal 2011, spending by the Fire Department exceeded its budget by 25 percent, and Police Department spending surpassed its budget by 10.3 percent.