LOS ANGELES -- Standard & Poor's Corp. on Friday lowered ratings on $244 million of outstanding San Diego County lease issues, citing the county's "reduced financial flexibility" due to increased service costs, reduced state support, and declining property values.
In its downgrade action, the rating agency removed nine certificate of participation and lease revenue bond issues from CreditWatch, where they were placed June 2 with negative implications.
Ratings on two COP issues totaling $44 million were lowered to a provisional A from a provisional A-plus. Ratings on five lease revenue bond issues totaling $123 million were lowered to A from A-plus. The ratings on two additional COP issues totaling $77 million were also lowered to A from A-plus.
"It was not unexpected," said William Kelly, acting auditor for San Diego County. "We view it as a reflection of the recessionary times we are in, and as a result of the state economy and budget cuts."
Standard & Poor's noted that recent state budget cuts will force the county to trim an additional $30 million from its already adopted fiscal 1993 budget. The cuts come in addition to $26 million of reductions the county made in July and $66 million of cuts implemented last year.
"The compounding effects of budget trimming decrease the county's available options," the rating agency said in a release. "Further threats to the county's discretionary revenues include possible new state cuts as a result of the state's continued budget challenges, and the county's own continued weak economic growth."
The county is suffering from a recession-weary economic base, sharply lower property value growth, and continuing financial pressure in the social service and justice areas, the rating agency said.
The property value growth for fiscal 1993 is 4.5%, lower than the 11% to 12% growth rates of recent years, Standard & Poor's said.
Another blow to the county was a recent decision in the Rider v. County of San Diego case, which overturned a regional agency's ability to levy a sales tax for jails. The county still has $350 million of collected sales tax funds that are subject to pending court action.
Jeffrey Thiemann, a director with Standard & Poor's in San Francisco, said the A rating is "still a good rating," and cited the strong management of the county as one reason for keeping the lease issues in the A category.
"They have very good management, but what they have to work with has gotten tighter and tighter in past years. It's a tough job," he said.
Mr. Thiemann said the state budget cuts and the recession in California are putting burdens on other counties as well.
"We're beginning to see other counties with the same pressures," he said.
