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U.S. Local Governments Credit Brief: California Counties And Municipalities

Overview

California counties and municipalities (or local governments [LGs]) have demonstrated stable credit quality through the pandemic, and S&P Global Ratings expects credit quality for California LGs to remain stable in the near term. The stability is supported by growing property tax bases, strong budgetary performance, and very strong financial flexibility.

S&P Global Ratings maintains ratings on 252 LGs within the state. Overall, LG credit quality remained stable, with 6.7% experiencing rating movement since January 2020. During this period, California LGs had 12 positive rating movements and five negative rating movements on general obligation or general fund-secured bonds. Additionally, at 96%, the majority of the ratings have a stable outlook, while 1% have positive and 3% have negative outlooks.

What We Are Watching In 2021 And Beyond

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Strong AV Growth Continues To Support LG Budgets

AV growth has generally remained strong despite the pandemic, supporting steady growth in LG revenues. Median single-family home prices in California increased by 4.2% and 7.6% for new housing and existing housing, respectively, in calendar 2020 and are projected to increase by a remarkable 16.7% and 16.8%, respectively, in 2021, according to forecasts by IHS Markit. Robust real estate activity was broadly driven by low interest rates, and suburban markets particularly benefited during the pandemic as residents with the ability to work remotely decamped from city centers. For fiscal 2022, the first year of AV data that incorporates any impacts from the pandemic, the median increase in countywide AV was 4.6%, reflecting additions to tax rolls as well as changes in AV as prescribed by formula under Proposition 13.

California LGs Performed Well During The Pandemic, But Challenges Remain

LGs generally and in California performed well through the pandemic, and we continue to monitor performance as they transition back toward normal operations. We attribute this in large part to both proactive management teams at the local level as well as significant federal support. At the outset of the pandemic, LGs generally used very conservative revenue assumptions for their fiscal 2021 budgets based on the high degree of uncertainty introduced by the pandemic. The experience of California's LGs during the Great Recession also contributed to a conservative response. To balance their budgets, LGs typically suspended discretionary capital spending, instituted hiring freezes, and/or negotiated with labor groups to hold compensation levels flat (in some cases eliminating or deferring previously negotiated salary increases).

Actual LG revenues generally outperformed the conservative budget assumptions for fiscal 2021 except for tourism-related revenues, which resulted in negative rating actions on a small number of credit ratings. Going forward, we are particularly attentive to labor discussions and, given strong actual revenue performance, whether calls from labor groups for substantial compensation increases will lead to any future budgetary pressures or imbalances. We are also closely monitoring the use of stimulus funds and whether those one-time moneys are being deployed for any ongoing programs that could cause budgetary pressures once stimulus funds are fully expended.

Spotlight On Environment, Social, Governance Factors

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The state is broadly exposed to a wide range of environmental risks. Acute physical risks stemming from wildfires and droughts, as well as chronic issues resulting from hydrological volatility and sea level rise; energy transition risk; other hazards such as seismic events and mudslides; and natural capital stress related to water scarcity are heightened risks for some entities absent adaptation measures.

Housing affordability has resulted in demographic shifts and elevated social risks. In addition, we expect the future cost of municipal services will rise significantly given required infrastructure investment to meet demand and asset deficiencies including grid reliability associated with ambitious energy transition requirements.

The state has a long history of policymaking aimed at preserving natural capital that mitigates or reduces climate risks, and addresses socioeconomic inequities. While these policies advance ESG principles, there are also limitations on key revenue streams that have hindered infrastructure investment, creating meaningful challenges to adaptation efforts. Furthermore, the state provides limited oversight for distressed municipalities as represented in our LG institutional framework.

For more information on California LG ESG factors, see "ESG U.S. Public Finance Report Card: California Governments And Not-For-Profit Enterprises," published June 16, 2021.

California Local Governments Data

Table 1

California Counties: Medians
Rating
AAA AA+ AA AA- A+ A
Projected per capita EBI (%) 125 121 81 72 61 65
Market value per capita ($) 191,599 194,844 135,866 105,656 77,458 86,535
Available general fund (%) 24 18 9 18 13 21
General fund performance (%) 1.1 (0.8) 0.3 1.9 0.6 (0.4)
Cash and expense (%) 86 85 53 45 44 33
Carrying charge (%) 2.2 1.7 1.7 2.6 1.9 1.2
Pension ARC + OPEB as % expense 10.7 11.3 8.2 8.0 6.5 7.1
EBI--Effective buying income. ARC--Annual required contribution. OPEB--Other postemployment benefits.

Table 2

California Municipalities: Medians
Rating
AAA AA+ AA AA- A+ A A- BBB+ or lower
Projected per capita EBI (%) 189 126 94 71 61 56 88 94
Market value per capita ($) 294,461 181,083 132,596 98,844 70,418 71,284 95,436 95,003
Available general fund (%) 49 33 35 37 39 7 10 19
General fund performance (%) (0.1) 1.3 2.1 1.0 (0.2) (3.6) 0.3 (3.8)
Cash and expense (%) 136 147 125 108 122 118 138 91
Carrying charge (%) 2.8 2.7 3.3 3.9 4.2 8.7 5.1 4.3
Pension ARC + OPEB as % expense 9.9 15.5 13.3 11.0 11.1 15.0 7.1 16.3
EBI--Effective buying income. ARC--Annual required contribution. OPEB--Other postemployment benefits.

Chart 1

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Chart 2

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Table 3

California Counties: Ratings List
As of Oct. 7, 2021
This list was prepared by individuals on behalf of the USPF Group of S&P Global Ratings and is current as of Oct. 7, 2021. For the most up to date, accurate, and complete information on any credit ratings referenced in this list, please visit www.standardandpoors.com.
Organization GO rating GO outlook Ratings linked to obligor creditworthiness rating* Outlook
Alameda Cnty AAA Stable AA+ Stable
Calaveras County AA Stable AA- Stable
Contra Costa County AAA Stable AA+ Stable
Fresno Cnty AA- Stable
Imperial Cnty A- Stable
Kern Cnty A+ Stable
Kings Cnty A Stable
Los Angeles Cnty AAA Stable AA+ Stable
Madera Cnty AA- Negative A+ Negative
Marin Cnty AAA Stable AA+ Stable
Mendocino Cnty AA- Stable A+ Stable
Merced Cnty A+ Stable
Mono Cnty AA- Stable
Monterey Cnty AA+ Stable
Napa Cnty AA+ Stable
Nevada Cnty AA Stable
Orange Cnty AA+ Stable AA Stable
Placer County AA+ Stable AA Stable
Riverside Cnty AA Stable AA- Stable
Sacramento County AA- Stable A+ Stable
San Benito Cnty AA Stable
San Bernardino County AA+ Stable AA Stable
San Diego Cnty AAA Stable AA+ Stable
San Joaquin Cnty A+ Stable
San Luis Obispo Cnty AAA§ Stable
San Mateo Cnty AAA Stable AA+ Stable
Santa Barbara Cnty AA+ Stable
Santa Clara Cnty AAA Stable AA+ Stable
Santa Cruz Cnty AA+ Stable
Solano County AA+ Stable
Sonoma Cnty AAA§ Stable
Stanislaus Cnty AA Stable Stable
Tehama Cnty A- Stable
Tulare County AA-§ Stable
Tuolumne Cnty AA- Stable
Ventura Cnty AAA Stable AA+ Stable
Yolo Cnty A+ Stable
Yuba Cnty AA- Stable A+ Stable
*All ratings in column are appropriation ratings unless otherwise noted. §Legally available funds pledge.

Table 4

California Municipalities: Ratings List
As of Oct. 7, 2021
This list was prepared by individuals on behalf of the USPF Group of S&P Global Ratings and is current as of Oct. 7, 2021. For the most up to date, accurate, and complete information on any credit ratings referenced in this list, please visit www.standardandpoors.com.
Organization GO Rating GO Outlook Ratings linked to obligor creditworthiness rating* Outlook
Agoura Hills AA+ Stable
Alameda AA+ Stable AA Stable
Albany AA+ Stable
Alhambra AA Stable AA- Stable
Anaheim A- Negative
Antioch AA- Stable
Arcadia AAA Stable AAA§ Stable
Atascadero AA- Stable
Auburn AA+§ Stable
Azusa AA-§ Stable
Baldwin Pk AA-§ Stable
Bell BBB+ Stable
Bell Gardens A+ Stable
Benicia AA Stable AA- Stable
Berkeley AA+ Stable AA Stable
Beverly Hills AAA Stable AA+ Stable
Brawley A-§ Negative
Brea AA Stable
Brentwood AA+ Stable AA Stable
Brisbane AA- Stable
Buena Park AA Stable
Burbank AAA Stable
Burlingame AAA Stable AA+ Stable
Calabasas AA+ Stable
Camarillo AAA Stable AA+ Stable
Campbell AAA Stable AA+ Stable
Carlsbad AAA Stable AA+ Stable
Carmel By The Sea AA+ Stable
Carson AA-§ Stable
Cerritos AAA Stable AA+ Stable
Chowchilla A Stable
Chula Vista AA- Stable
City of Covina AA§ Stable
Claremont AAA Stable
Clovis AA- Stable
Coachella A+ Stable
Colma Twn AA Stable
Colton A Stable A- Stable
Commerce A+ Stable
Concord AA Stable
Corona AA Stable
Corte Madera Twn 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- Stable
Dublin AAA Stable AA+ Stable
El Cajon AA§ Stable
El Centro A+ Stable A Stable
El Cerrito BBB- Stable
El Monte A Negative
El Paso De Robles AAA Stable
El Segundo AA+§ Stable
Elk Grove AA Stable
Encinitas AAA Stable AA+ Stable
Escondido AA- Stable A+ Stable
Fairfax Twn AA+ Stable
Fairfield AA§ Stable
Fontana AA Stable AA- Stable
Foster City AA+ Stable
Fountain Valley AAA Stable AA+ Stable
Fremont AA+ Stable AA Stable
Fresno A+ Stable A Stable
Fullerton AA- Stable
Garden Grove AA Stable
Gardena A+ Stable
Gilroy AA+ Stable AA Stable
Glendale AA+ Stable AA Stable
Glendora AAA§ Stable
Grass Vy AA§ Stable
Grover Beach AA Stable
Hawthorne A+ Stable
Hayward AA Stable
Hermosa Beach AA+ Stable
Hesperia A Stable
Huntington Beach AA Stable
Indio AA- Stable A+ Stable
Inglewood AA- Stable A+ Stable
Jurupa Valley AA- Stable
Kingsburg A+ Stable
La Habra AA+ Stable AA Stable
La Mirada AA+ Stable AA Stable
La Puente A+ Stable
La Verne AA+§ Stable
Laguna Hills AA+ Stable
Lake Elsinore A Stable
Lake Forest AAA Stable AA+ Stable
Lakeport AA- Stable
Lancaster A Stable
Larkspur AAA Stable AA+ Stable
Lincoln AA- Stable
Livermore AA Stable
Lodi A+ Stable
Long Beach AA Stable AA- Stable
Los Alamitos AAA Stable AA+ Stable
Los Altos AA+ Stable
Los Angeles AA Stable AA- Stable
Los Gatos AA+ Stable
Lynwood A- Stable
Madera A Stable
Malibu AAA Stable AA+ Stable
Mammoth Lakes A+§ Negative
Manhattan Beach City AAA Stable AA+ Stable
Marina AA- Stable
Martinez AA+ Stable
Marysville A Stable
Mill Vy AAA Stable AA+ Stable
Millbrae AA+ Stable
Milpitas AAA Stable AA+ Stable
Mission Viejo AAA Stable AA+ Stable
Monrovia AA Stable AA- Stable
Montclair A+ Stable
Montebello A+ Stable A Stable
Monterey Park AA§ Stable
Moraga AA+ Stable
Moreno Vy AA- Stable
Morgan Hill AA Stable
Mountain House Comnty Servs Dist AA Stable
Mountain View AAA Stable
Murrieta AA- Stable
National City A+ Stable
Newark AA Stable
Newport Beach AAA Stable AA+ Stable
Norwalk A+ Stable
Oakland AA Stable AA- Stable
Oakley AA- Stable
Oceanside AA+ Stable AA Stable
Ontario AA- Stable
Orange AA- Stable
Orinda AAA Stable AA+ Stable
Oxnard A Stable A- Stable
Pacifica AA Stable
Palm Springs AA+ Stable AA Stable
Palmdale AA- Stable A+ Stable
Palo Alto AAA Stable AA+ Stable
Pasadena AAA Stable AA+ Stable
Petaluma AA Stable
Pico Rivera AA- Stable
Pismo Beach AA+ Stable
Pittsburg AA- Stable AA-§ Stable
Placentia A- Positive BBB+ Positive
Pomona A+ Negative
Poway AA+ Stable
Rancho Cordova AA- Stable
Rancho Cucamonga AA+ Stable AA Stable
Rancho Santa Margarita AAA Stable AA+ Stable
Red Bluff A+§ Stable
Redding A+ Stable
Redlands AA-§ Stable
Redondo Beach AA+ Stable AA Stable
Redwood City AA+ Stable
Richmond AA- Stable A+ Stable
Ridgecrest A Stable
Riverside AA Stable AA- Stable
Rocklin AA+ Stable AA Stable
Roseville AA+ Stable AA Stable
Sacramento AA Stable AA- Stable
Salinas AA- Stable A+ Stable
San Anselmo Twn AAA Stable AAA§ Stable
San Bruno AA+ Stable
San Buenaventura AA Stable
San Carlos AAA Stable
San Diego AA Stable AA- Stable
San Fernando A+§ Stable
San Francisco City and County AAA Negative AA+ Negative
San Jose AA+ Stable AA Stable
San Juan Capistrano AAA Stable
San Leandro AA- Stable
San Luis Obispo AA+ Stable AA Stable
San Mateo AAA Stable AA+ Stable
San Pablo AA- Stable
San Rafael AA Stable
San Ramon AAA Stable AA+ Stable
Sanger A Stable
Santa Ana AA Stable AA** Stable
Santa Clara AA Stable
Santa Clarita AAA Stable AA+ Stable
Santa Cruz AA+ Stable AA Stable
Santa Monica AAA Stable AA+ Stable
Santa Rosa AA- Stable
Saratoga AAA Stable
Sausalito AAA Stable AA+ Stable
Scotts Vy AA- Stable
Seaside AA- Stable
Shasta Lake A+ Stable
Signal Hill AA Stable
Simi Valley AAA Stable AA+ Stable
South Gate A+§ Stable
South Lake Tahoe AA Stable
South San Francisco AAA Stable AA+ Stable
Sunnyvale AAA Stable AA+ Stable
Thousand Oaks AA+ Stable
Torrance AA Negative
Tracy AA- Stable
Truckee AA+ Stable
Tulare A Stable
Ukiah A+ Stable
Union City AA+§ Stable
Vallejo BBB Stable
Victorville AA- Stable
Visalia A+ Stable
Vista AA- Stable
West Covina A+ Stable
West Hollywood AAA Stable AA+ Stable
Westlake Vill AA+ Stable
Westminster A+ Stable
Whittier AA§ Stable
Willows City A+§ Stable
Yorba Linda AAA Stable AA+ Stable
Yountville AA Stable AA- Stable
Yuba City A+ Stable
*All ratings in column are appropriation ratings unless otherwise noted. §Legally available funds pledge.

This report does not constitute a rating action.

Primary Credit Analyst:Tim Tung, CFA, San Francisco + 1 (415) 371 5041;
tim.tung@spglobal.com
Secondary Contacts:Chris Morgan, San Francisco + 1 (415) 371 5032;
chris.morgan@spglobal.com
Bianca Gaytan-Burrell, Centennial + 303-721-4617;
bianca.gaytan-burrell@spglobal.com
Jane H Ridley, Centennial + 1 (303) 721 4487;
jane.ridley@spglobal.com
David G Hitchcock, New York + 1 (212) 438 2022;
david.hitchcock@spglobal.com

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