Credit trends in California's municipal lease market have been negative in the last 21 months, with the volume of debt downgraded far exceeding the amount upgraded, Standard & Poor's Corp. said.

For the first nine months of 1994, ratings on almost $4.4 billion of California lease issues were lowered, while upgrades were limited to about $7 million. In 1993, Standard & Poor's downgraded $464 million of California lease securities and raised the ratings on about $51 million.

Through its State Public Works Board and two building authorities, California accounted for the largest lease rating downgrade by Standard & Poor's in 1994. In July, ratings were lowered to A-minus from A on $3.15 billion of state lease-related obligations. The rating agency said the downgrade was prompted by the state's failure "to adequately address its accumulated deficit" and because the state "balanced its budget with optimistic assumptions of federal aid."

Among California local governments, counties have experienced the greatest credit pressure, the rating agency said. This year, ratings have been lowered for Los Angeles, San Bernardino, and Marin counties.

Ratings on California's cities generally have been stable. Compared with counties, cites rely less on property taxes, which have been subject to state revenue transfers. Inglewood is the only city to have its rating downgraded this year -- to BBB from BBB-plus on $33 million of obligations in March.

Two cities, Anaheim and Santa Clara, have posted upgrades in 1994. Anaheim's $3 million of lease obligations were upgraded to A-plus from A in September and Santa Clara's $4 million of obligations were upgraded to A-plus from A in June.

California lease issues rated by Standard & Poor's this year through mid-October totaled $1.7 billion, and the amount is forecast to reach about $2.2 billion by yearend. Because of historically low interest rates, 1993 was an exceptional year for lease volume in California, the rating agency said. A total of $4.6 billion of unenhanced issues were rated by Standard & Poor's, including $2.4 billion of lease refunding issues.

The leasing recap was published in yesterday's CreditWeek Municipal.

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