Ventura gets an upgrade
The city of Ventura has received a boost in its credit rating from Standard & Poor’s.
On Jan. 9, the agency raised Ventura’s public facilities financing authority from an A rating to a AA- rating, two notches below the top grade for its kind of debt. High ratings let the city borrow money cheaper and could save millions if the city brings bonds to market, especially in a credit crunch.
With cities throughout the Tri-Counties struggling to fill budget shortfalls, Ventura – with $12 million in emergency reserves – has one of the strongest financial positions in the region.
Only Santa Barbara’s financing authority and Santa Maria have a better rating. Thousand Oaks and San Luis Obispo tie Ventura. The comparisons are limited, however, because different debt structures allow for different maximum ratings, and some factors in ratings are beyond a city’s control.
Ventura’s ratings boost comes amid a gloomy income picture – city officials predict flat sales tax revenue and are working to approve a $4 million trim to an already slimmed-down budget by March.
“The problems with the poor economy may last two years,” said Sandra Repede, Ventura’s budget supervisor. “Rather than doing a temporary hiring freeze and having to lay off people six months from now, we want to act now.”
Standard & Poor’s cited those actions and the city’s healthy reserves – $12 million in emergency funds, plus millions more, totaling about 22 percent of spending – in raising the city’s rating.
“These are long-term ratings, so we expect there will be some fluctuations in both [Ventura’s] spending and revenues over time,” Standard & Poor’s analyst Chris Morgan told the Business Times. “The fact that they’re responding to those is important to the rating.”
Morgan continued: “One of the things we look for is that they have a cushion for when things go wrong. We think they’re pretty well-positioned to deal with some revenue pressure.”
The ratings boost for Ventura is the third in three months. In November, the city’s water and sewer bonds rose from A+ to AA and its redevelopment agency’s debt from A- to A.
But key financial challenges remain. The recent Standard & Poor’s report named three: The implosion of a $5 million investment backed by Washington Mutual and Lehman Brothers, a $2.2 million hit from the expected repeal of the city’s controversial 911 fee and falling tax revenues, which have already dropped 1 percent this year compared to the last fiscal year.
The city has already demonstrated considerable fiscal restraint, keeping spending flat at about $94 million each year since 2007. But Repede said this year’s revenues are on track to support spending of about $90 million, so the city is looking “to truly balance the budget,” she said. “If it means having to make layoffs, we’ll have to do that.”
The problem isn’t spending – it’s sales tax revenue. In 2007, the city pulled in about $17.7 million.
“This year, primarily due to poor sales of new automobiles, we’re estimating to finish at $16.8 million [in sales tax revenue],” Repede said. “For the future, we’re expecting about $16 million for 2009 and then sales tax to flatten out for 2010.”
The declines call for spending cuts. The city has implemented a what Repede calls a “soft hiring freeze,” holding open about 35 vacant positions.
Ventura’s 911 fee – which generated a swirl of controversy and which the city council is expected to repeal – will produce a financial wash, Repede said, with revenue cuts cancelled by the costs saved in not having to administer the program.
But the decline in sales tax revenue also might sharpen the argument for a new tax. Officials are mulling raising the city’s sales tax by a quarter percent.
Ventura’s rate is 7.25 percent and would rise to 7.5 percent, a rate Repede said many Californians already pay.
“A couple years ago, in this city, a quarter cent sales tax wasn’t looked upon favorably,” Repede said. “But because of the crisis with the economy, we think citizens might be a little more open-minded. We would be raising ours and coming to the level that most cities are already at.”
Repede said the city’s revenue balance already has helped. Ventura derives nearly equal amounts from sales and property taxes, but that could change.
“We just have to examine that going forward and how to not be so reliant on sales tax,” Repede said. “Just like in your personal finances, you diversify.”
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