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.
Credit Fundamentals
Potential Challenges
- Strong tax bases with continued assessed valuation (AV) growth driven by robust real estate market activity and formulaic AV increases provided under Proposition 13
- Strong budgetary performance and reserves, with median available fund balance above 35% of operating expenditures, supported in part by substantial federal aid since the onset of the COVID-19 pandemic
- Financial management policies and practices that we consider predominantly strong or good under our Financial Management Assessment methodology
- Budgetary challenges driven by rising labor costs that will pressure many LGs (specifically, LGs that constrained salary and benefit increases at the outset of the pandemic may now face calls from labor groups for significant adjustments given better-than-forecast revenue performance during the last fiscal year)
- Pockets of weakness--such as dampened tourism activity--related to public health concerns and restrictions that may persist if COVID-19 pandemic effects linger
- Moderately funded pension plans with costs that will continue to rise for almost all LGs
- Decreasing housing affordability as rising housing costs continue to outpace wage growth
- Environmental impacts--particularly wildfire and drought in the near term--and the need for LGs to be prepared for these events while being flexible in their response and adapting to changing conditions
What We Are Watching In 2021 And Beyond
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
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
Chart 2
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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