Counties' rating outlook is brightened in California by passage of half-cent state sales tax proposition.

LOS ANGELES - Financial pressures on California counties have diminished following last Tuesday's voter approval of a statewide sales tax measure, Moody's Investors Service and Standard & Poor's Corp. said last week.

The measure, Proposition 172, permanently extends a half-cent sales tax that is expected to raise about $1.5 billion annually for local police and fire services. Cities will share a portion of the revenues, but most proceeds will benefit counties.

"A rejection of the sales tax extension would have resulted in the ratings of several counties being placed on CreditWatch," Standard & Poor's said in a press release last Thursday.

A Moody's official said the specter of county rating downgrades is eased by the proposition's approval.

There could be "some downgrades" in the future, but "there probably will be fewer" of them following approval of the measure, said Ken Kurtz, assistant vice president and a supervisor for Moody's Far West regional ratings office in San Francisco.

Kurtz said the approval of Proposition 172 removes "a significant uncertainty" for counties. He said, however, that Moody's believes counties will continue to experience financial problems, "and we are continuing to look at all of them."

Moody's has ratings on 44 of California's 58 counties. Standard & Poor's rates 33 counties.

Standard & Poor's has revised its outlook on six counties to negative from stable during the past three years. The agency has lowered the ratings on the counties of San Diego and San Francisco.

Counties with a negative outlook from Standard & Poor's are Alameda, El Dorado, Los Angeles, Monterey, Riverside, and San Bernardino.

Standard & Poor's said it expects "only a small proportion of the counties to ultimately experience rating downgrades, but rating actions are likely in selected instances."

"Future concerns that will continue to be monitored by Standard & Poor's include the state's ability to generate sufficient sales tax receipts to meet county budget projections, and the use of one-time remedies, such as Teeter plan proceeds, to balance already weak county budgets," the ratings agency said.

The Teeter plan involves an alternative form of property tax distribution to local governments.

California lawmakers devised Proposition 172 with Gov. Pete Wilson's support to offset the state's shift this fiscal year of $2.6 billion of property taxes to schools from local governments. The $2.6 billion shift allowed the state to reduce its share of school funding by the same amount.

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