Moody’s upgrades city’s bond rating

Moody’s gave the city a baa2 rating on Tuesday.

Herald file photo

City Manager Jack Schnirman said Long Beach has been under greater scrutiny by Moody’s since 2011, after it downgraded the city’s rating five levels.

Courtesy City of Long Beach

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Three years after the city was on the verge of bankruptcy, Moody’s Investors Service upgraded Long Beach’s bond rating a notch on Tuesday and gave the city a positive outlook, citing improved financial controls and a deficit-reduction borrowing measure the City Council approved last year.

Moody’s upgraded the city’s general obligation debt rating from baa3 — a step above junk bond status — to baa2, and has given it a positive outlook on future bond upgrades.

“[The positive outlook] means that it could be upgraded again sometime over the next 12 to 24 months,” said David Jacobson, a spokesman for Moody’s, who added that future rating reviews will focus on the city’s ability to adhere to its plan to maintain structural balance, restore reserves and use conservative budgeting practices.

Since the administration inherited a multi-million-dollar deficit when it took office in 2012 — the city’s reserve fund was “wiped out,” officials said — Moody’s has noted steps officials have taken over the past few years to turn the city’s finances around, including various cost controls and other policies that resulted in the second expected operating surplus in five fiscal years. “Not only did they upgrade our rating, but they also added a positive outlook, which means they believe we’re beginning to trend aggressively in the right direction,” City Manager Jack Schnirman said. “Obviously, we’ve closed the deficit and have begun to replenish our reserves, our rainy-day fund.”

Long Beach currently has $66 million in general-obligation debt outstanding, and Moody’s also assigned its baa2 rating to $6.5 million in general-obligation serial bonds first approved in 2013 to pay for mandatory retroactive salaries to members of the Long Beach Patrolmen’s Benevolent Association, after a state arbitrator approved a contract that year. The city intends to issue the bonds next week, “to convert previously approved borrowing from short-term debt to long-term debt as planned,” explained Schnirman, adding that the move would result in a $300,000 savings for taxpayers.