Overview
California municipalities' credit quality remains very strong, in S&P Global Ratings' view, supported by a dynamic economy that has been one of the nation's top performing for the last several years, generally strong budgetary performance facilitated by steady revenue growth, and financial management often supported by formal policies and regular budget monitoring. These conditions have supported municipalities' efforts to maintain robust available reserves, which have helped more than 83% of California's municipal issuers maintain general obligation (GO) ratings, issuer credit ratings, or general creditworthiness in the 'AA' or 'AAA' categories. S&P Global Ratings does not expect any significant changes to the California municipal sectors' credit quality over the next year, but believes prospects for continued growth are diminishing.
S&P Global Ratings maintains public ratings on 200 municipalities in California. Overall, the credit quality increased recently, with 9% of California cities and towns experiencing upward rating movement or positive outlooks throughout 2019. More specifically, we took 17 positive rating actions and two negative rating actions on municipalities' GO or appropriation debt.
Credit Fundamentals
Potential Challenges
- Diverse economy that has ranked among the nation's top-performing states throughout the past several years, although in 2019 the rate of job creation and economic growth continued to moderate closer to the national average
- Strong financial performance and budgetary flexibility stemming from property tax revenue growth and robust taxable sales
- Financial Management Assessments considered good or strong for most municipalities with formalized financial policies and practices
- Adequately funded pension plans, with recent steps by pension plan administrators to incorporate more prudent methods and assumptions, resulting in increased plan stability
- Housing affordability, which is increasingly weighing on economic potential of California municipalities, and in some cases leading to increased operating and fixed-cost commitments
- Increasing fixed costs in the coming years, driven in part by recent improvements to the California Public Employees' Retirement System actuarial methods and assumptions, that may be difficult for some municipalities to absorb--particularly if an economic correction strains revenues
- Limited state framework for raising local revenues, with increased potential for voter fatigue for new revenue measures in the coming years
California Municipalities Data
Table 1
California Municipalities: Medians | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Rating | ||||||||||||||||||
AAA | AA+ | AA | AA- | A+ | A | A- | BBB+ or lower | |||||||||||
Projected per capita EBI (%) | 188 | 128 | 91 | 71 | 55 | 55 | 31 | 72 | ||||||||||
Market value per capita ($) | 267,068 | 170,194 | 123,274 | 88,808 | 62,237 | 52,868 | 28,462 | 81,377 | ||||||||||
Available general fund (%) | 48 | 35 | 28 | 29 | 28 | 13 | 36 | (3) | ||||||||||
General fund performance (%) | 2.5 | 2.0 | 1.8 | 1.7 | 3.0 | 1.9 | 0.8 | (0.4) | ||||||||||
Cash and expense (%) | 148 | 123 | 131 | 102 | 99 | 77 | 13 | 85 | ||||||||||
Carrying charge (%) | 2.8 | 3.0 | 4.2 | 3.7 | 4.5 | 7.5 | 1.4 | 4.9 | ||||||||||
Pension ADC + OPEB as % expense | 8.9 | 12.0 | 11.6 | 9.8 | 9.3 | 10.6 | 0.0 | 13.1 | ||||||||||
EBI--Effective buying income. ADC--Actuarially-determined contribution. OPEB--Other postemployment benefits. |
Table 2
California Municipalities: Financial Management Assessment | ||||||||
---|---|---|---|---|---|---|---|---|
Rating | ||||||||
Score (%) | AAA | AA+ | AA | AA- | A+ | A | A- | BBB+ or lower |
Strong | 43 | 20 | 19 | 8 | 6 | 0 | 0 | 0 |
Good | 55 | 70 | 81 | 74 | 35 | 33 | 0 | 17 |
Standard | 2 | 9 | 0 | 18 | 59 | 67 | 100 | 67 |
Vulnerable | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 17 |
Chart 1
Table 3
Selected Rating And Outlook Changes | ||||||||
---|---|---|---|---|---|---|---|---|
From Jan. 1, 2019, through Dec. 31, 2019 | ||||||||
To | From | Date | ||||||
Selected rating changes* | ||||||||
Rancho Cucamonga | AA+ | AA | 17-Jan-19 | |||||
San Francisco City & County | AAA | AA+ | 5-Feb-19 | |||||
Redding | A+ | A | 24-Apr-19 | |||||
Richmond | AA- | A- | 31-May-19 | |||||
San Mateo | AAA | AA+ | 12-Aug-19 | |||||
Burlingame | AAA | AA+ | 30-Aug-19 | |||||
Pacifica | AA+ | AA | 27-Sep-19 | |||||
McFarland | BBB+ | A- | 17-Oct-19 | |||||
Sausalito | AAA | AA+ | 30-Oct-19 | |||||
Colton | A | A- | 31-Oct-19 | |||||
Placentia | BBB | BB | 5-Nov-19 | |||||
San Anselmo | AAA | AA+ | 13-Nov-19 | |||||
La Habra | AA+ | AA | 14-Nov-19 | |||||
Gilroy | AA+ | AA | 21-Nov-19 | |||||
El Cerrito | BBB | A- | 26-Nov-19 | |||||
Calexico | BBB- | BB+ | 20-Dec-19 | |||||
Outlook changes | ||||||||
Chowchilla | Positive | Stable | 22-Feb-19 | |||||
Montebello | Negative | Stable | 19-Nov-19 | |||||
Moreno Valley | Positive | Stable | 8-Mar-19 | |||||
Oxnard | Positive | Stable | 31-Oct-19 | |||||
San Diego | Stable | Positive | 6-Aug-19 | |||||
*Rating changes do not include new ratings or withdrawn ratings. Ratings provided are appropriation ratings where GO or legally available rating is not available. |
Table 4
California Municipalities--Rating List | ||||||||
---|---|---|---|---|---|---|---|---|
As of Jan. 8, 2020 | ||||||||
This list was prepared by individuals on behalf of the USPF Group of S&P Global Ratings and is current as of Jan. 8, 2020. For the most up to date, accurate, and complete information on any credit ratings referenced in this list, please visit www.standardandpoors.com. | ||||||||
Organization | Rating - GO | Rating - appropriation | Outlook | |||||
Agoura Hills | -- | AA+ | Stable | |||||
Alameda | AA+ | AA | Stable | |||||
Albany | AA+ | -- | Stable | |||||
Alhambra | AA | AA- | Stable | |||||
Anaheim | -- | AA- | Stable | |||||
Antioch | -- | AA- | Stable | |||||
Arcadia | AAA | -- | Stable | |||||
Atascadero | -- | AA- | Stable | |||||
Azusa | -- | A+ | Stable | |||||
Baldwin Park* | AA- | -- | Stable | |||||
Bell | BBB+ | -- | Stable | |||||
Bell Gardens | -- | A+ | Stable | |||||
Bellflower | -- | A+ | Stable | |||||
Benicia | AA | AA- | Stable | |||||
Berkeley | AA+ | AA | Stable | |||||
Beverly Hills | AAA | AA+ | Stable | |||||
Brawley* | A | -- | Stable | |||||
Brea | -- | AA | Stable | |||||
Brentwood | AA+ | AA | Stable | |||||
Brisbane* | AA | AA- | Stable | |||||
Buena Park | -- | AA | Stable | |||||
Burbank | AAA | -- | Stable | |||||
Burlingame | AAA | AA+ | Stable | |||||
Calabasas | -- | AA+ | Stable | |||||
Calexico | -- | BBB- | Positive | |||||
Calistoga | -- | AA | Stable | |||||
Camarillo | AAA | AA+ | Stable | |||||
Campbell | AAA | AA+ | Stable | |||||
Carlsbad | AAA | AA+ | Stable | |||||
Carmel By The Sea* | AAA | AA+ | Stable | |||||
Cerritos | AAA | AA+ | Stable | |||||
Chowchilla* | A+ | A | Positive | |||||
Chula Vista | -- | AA- | Stable | |||||
Claremont | AAA | -- | Stable | |||||
Coachella | -- | A+ | Stable | |||||
Colma | -- | AA | Stable | |||||
Colton | A | A- | Stable | |||||
Commerce | -- | A+ | Stable | |||||
Corona | -- | AA- | Stable | |||||
Corte Madera | -- | AA | Stable | |||||
Costa Mesa | -- | AA+ | Stable | |||||
Cupertino | -- | AA+ | Stable | |||||
Delano | -- | A+ | Stable | |||||
Desert Hot Springs | -- | A+ | Stable | |||||
Diamond Bar | -- | AA+ | Stable | |||||
Dinuba | -- | A- | Stable | |||||
Downey* | AA | AA- | Stable | |||||
El Centro | A+ | A | Stable | |||||
El Cerrito | -- | BBB | Negative | |||||
El Monte | -- | A | Stable | |||||
El Paso De Robles | AAA | -- | Stable | |||||
Elk Grove | -- | AA | Stable | |||||
Encinitas | AAA | AA+ | Stable | |||||
Escondido | AA- | A+ | Stable | |||||
Fairfax | AA+ | -- | Stable | |||||
Fairfield* | AA | -- | Stable | |||||
Fontana | AA- | A+ | Stable | |||||
Fountain Valley | AAA | AA+ | Stable | |||||
Fremont | AA+ | AA | Stable | |||||
Fresno | A+ | A | Stable | |||||
Fullerton* | AA | AA- | Stable | |||||
Garden Grove | -- | A+ | Stable | |||||
Gardena | -- | A+ | Stable | |||||
Gilroy | AA+ | AA | Stable | |||||
Glendale | AA+ | AA | Stable | |||||
Glendora* | AAA | -- | Stable | |||||
Grover Beach | AA | -- | Stable | |||||
Hawthorne* | AA- | A+ | Stable | |||||
Hayward | -- | AA | Stable | |||||
Hermosa Beach | -- | AA+ | Stable | |||||
Hesperia | -- | A | Stable | |||||
Huntington Beach | -- | AA | Stable | |||||
Indio | AA- | A+ | Stable | |||||
Inglewood | AA- | A+ | Stable | |||||
Irwindale | -- | A+ | Stable | |||||
Kerman | -- | A | Stable | |||||
Kingsburg | -- | A+ | Stable | |||||
La Habra | AA+ | AA | Stable | |||||
La Mirada | AA+ | AA | Stable | |||||
La Verne* | AA+ | -- | Stable | |||||
Laguna Hills | -- | AA+ | Stable | |||||
Lake Elsinore | -- | A | Stable | |||||
Lake Forest | AAA | AA+ | Stable | |||||
Lakeport | -- | AA- | Stable | |||||
Lancaster | -- | A | Stable | |||||
Larkspur | AAA | AA+ | Stable | |||||
Lincoln | -- | AA- | Stable | |||||
Livermore | -- | AA | Stable | |||||
Lodi | -- | A+ | Stable | |||||
Long Beach | AA | AA- | Stable | |||||
Los Alamitos | AAA | AA+ | Stable | |||||
Los Altos | -- | AA+ | Stable | |||||
Los Angeles | AA | AA- | Stable | |||||
Los Gatos | -- | AA+ | Stable | |||||
Lynwood | -- | A- | Stable | |||||
Madera | -- | A | Stable | |||||
Malibu | AAA | AA+ | Stable | |||||
Mammoth Lakes* | A+ | -- | Stable | |||||
Manhattan Beach City | AAA | AA+ | Stable | |||||
Marina | AA- | -- | Stable | |||||
Martinez | AA+ | -- | Stable | |||||
Marysville* | A | A- | Stable | |||||
McFarland | -- | BBB+ | Negative | |||||
Mill Valley | AAA | AA+ | Stable | |||||
Millbrae | AA+ | -- | Stable | |||||
Milpitas | AAA | -- | Stable | |||||
Mission Viejo | AAA | AA+ | Stable | |||||
Monrovia | AA | AA- | Stable | |||||
Montclair | -- | A | Stable | |||||
Montebello | A+ | A | Negative | |||||
Moraga | -- | AA+ | Stable | |||||
Moreno Valley | -- | A+ | Positive | |||||
Morgan Hill | -- | AA | Stable | |||||
Mountain View | AAA | -- | Stable | |||||
Murrieta | -- | A+ | Stable | |||||
National City | A+ | -- | Stable | |||||
Newark | -- | AA | Stable | |||||
Newport Beach | AAA | AA+ | Stable | |||||
Norwalk | -- | A+ | Stable | |||||
Novato | AA+ | -- | Stable | |||||
Oakland | AA | AA- | Stable | |||||
Oakley | -- | AA- | Stable | |||||
Oceanside | AA+ | AA | Stable | |||||
Ontario | -- | AA- | Stable | |||||
Orinda | AAA | AA+ | Stable | |||||
Oxnard | A | A- | Positive | |||||
Pacifica | AA+ | AA | Stable | |||||
Palm Springs | AA+ | AA | Stable | |||||
Palmdale | AA- | A+ | Stable | |||||
Palo Alto | AAA | AA+ | Stable | |||||
Pasadena | AAA | AA+ | Stable | |||||
Pico Rivera | -- | AA- | Stable | |||||
Pismo Beach | -- | AA+ | Stable | |||||
Pittsburg | AA- | -- | Stable | |||||
Placentia | -- | BBB | Positive | |||||
Pomona* | AA- | A+ | Stable | |||||
Poway | -- | AA+ | Stable | |||||
Rancho Cordova | -- | AA- | Stable | |||||
Rancho Cucamonga | AA+ | AA | Stable | |||||
Rancho Santa Margarita | AAA | AA+ | Stable | |||||
Redding | -- | A+ | Stable | |||||
Redlands* | AA- | -- | Stable | |||||
Redondo Beach | AA+ | AA | Stable | |||||
Richmond | AA- | A+ | Stable | |||||
Ridgecrest | -- | A | Stable | |||||
Riverside | AA | AA- | Stable | |||||
Rocklin | AA+ | AA | Stable | |||||
Roseville | AA+ | AA | Stable | |||||
Sacramento | AA- | A+ | Stable | |||||
Salinas | AA- | A+ | Stable | |||||
San Anselmo | AAA | -- | Stable | |||||
San Bruno* | AAA | AA+ | Stable | |||||
San Buenaventura | -- | AA | Stable | |||||
San Carlos | AAA | -- | Stable | |||||
San Diego | AA | AA- | Stable | |||||
San Dimas | -- | AA | Stable | |||||
San Francisco City & County | AAA | AA+ | Stable | |||||
San Jose | AA+ | AA | Stable | |||||
San Juan Capistrano | AAA | -- | Stable | |||||
San Leandro* | AA | AA- | Stable | |||||
San Luis Obispo | AA+ | AA | Stable | |||||
San Mateo | AAA | AA+ | Stable | |||||
San Pablo | -- | AA- | Stable | |||||
San Rafael* | AA+ | AA | Stable | |||||
San Ramon | AAA | AA+ | Stable | |||||
Sanger | -- | A | Stable | |||||
Santa Ana | AA | -- | Stable | |||||
Santa Clara | -- | AA | Stable | |||||
Santa Clarita | AAA | AA+ | Stable | |||||
Santa Cruz | AA+ | AA | Stable | |||||
Santa Monica | AAA | AA+ | Stable | |||||
Santa Rosa* | AA | AA- | Stable | |||||
Saratoga | AAA | -- | Stable | |||||
Sausalito | AAA | AA+ | Stable | |||||
Scotts Valley* | AA | AA- | Stable | |||||
Seaside | -- | AA- | Stable | |||||
Shasta Lake | -- | A+ | Stable | |||||
Signal Hill | -- | AA | Stable | |||||
Simi Valley | AAA | AA+ | Stable | |||||
South Gate* | A+ | - | Stable | |||||
South Lake Tahoe* | AA+ | AA | Stable | |||||
Sunnyvale | AAA | AA+ | Stable | |||||
Thousand Oaks | -- | AA+ | Stable | |||||
Torrance | -- | AA | Stable | |||||
Tracy | -- | AA- | Stable | |||||
Truckee | -- | AA+ | Stable | |||||
Tulare | -- | A | Stable | |||||
Union City* | AA+ | - | Stable | |||||
Vallejo | -- | BBB | Stable | |||||
Visalia | -- | A+ | Stable | |||||
Vista | -- | AA- | Stable | |||||
West Covina | -- | A+ | Stable | |||||
West Hollywood | AAA | AA+ | Stable | |||||
Westlake Vill | -- | AA+ | Stable | |||||
Westminster | -- | A+ | Stable | |||||
Yorba Linda | AAA | AA+ | Stable | |||||
Yountville | AA+ | AA | Stable | |||||
Yuba City | -- | A+ | Stable | |||||
*GO rating provided is for bonds secured by pledge of all legally available revenue; no public unlimited tax general obligation rating or issuer credit rating. |
This report does not constitute a rating action.
Primary Credit Analyst: | Benjamin P Geare, San Francisco + 1 (415) 371 5047; benjamin.geare@spglobal.com |
Secondary Contact: | Chase C Ashworth, Centennial + 1 (303) 721 4289; chase.ashworth@spglobal.com |
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