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Budget Crisis Symptom: Fitch Withdrew LADWP's Nice Bond Rating
Photo by kpe II via LAist Featured Photos on Flickr
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Photo by kpe II via LAist Featured Photos on Flickr
After the back and forth about the carbon surcharge last week, bond rating agency Fitch reneged on their recent AA- rating bestowed up the L.A. Department of Water & Power last month. "Certain rate increases assumed in Fitch's analysis and discussed in the rating action commentary... were not implemented, as anticipated," the company announced yesterday. The previous bond rating was based upon an anticipated increase in LADWP rates via the controversial carbon surcharge. If a decreased bond rating is given, it would make borrowing money more expensive for the utility (The city of Los Angeles' bond rating was downgraded by Moody Investors Service in February and by Fitch last November).
The City Council and Mayor Antonio Villaraigosa, however, butted heads and no rate hike was ever implemented, an action that can only happen on a quarterly basis.
The anticipated bond rating withdrawal was one big reason behind DWP's refusal yesterday to transfer $73.5 million to the city's general fund, which pays for core city services like police, parks and streets. The DWP says city code allows them to only transfer the money when a "declaration of surplus can be made." $143 million of the traditional annual amount of $220 million was transferred earlier this year.
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Without the additional $73.5 million, which the City Council is officially requested today, the city will be out of money on May 5th. Villaraigosa today called for a reduction in work days for most all city departments, save for public safety and revenue-generating ones.
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