Rating Firm Agrees Anaheim Is Credit-Worthy Again : Bonds: City officials had been stressing its financial stability. Standard & Poor’s gives it confirmation, saying its short-term issues are safe for investors.
ANAHEIM — City officials, who in recent weeks have been stressing Anaheim’s financial stability, received some independent confirmation Wednesday: their short-term bond issues have been taken off of credit watch by Standard & Poor’s.
“Anaheim is the first city to be taken off of credit watch, which is a tribute to our financial stability,†Colson said. “We are sure that Wall Street will react positively to this news.â€
Standard & Poor’s said that the city’s removal from short-term credit watch “is due to the city’s substantial liquidity and investments outside of the Orange County pool.†The Wall Street credit rating agency concluded that the city is “expected to cover all citywide operations and debt service needs on a timely basis.â€
Standard & Poor’s added that the city’s long-term ratings will remain on credit watch until more information is learned about the distribution of assets from the county’s bankrupt bond pool and how the city plans to absorb those losses.
City officials have scheduled a budget workshop for Saturday, where they are to announce preliminary long-term budget plans.
Standard & Poor’s also praised Anaheim for taking steps to retain credit worthiness throughout the county’s budget crisis and for remaining committed to making full payment to all bondholders.
Anaheim has $169 million in the county investment pool, which represents about 20% of its $874-million investment portfolio. City officials estimate that they could lose as much as $45 million in the failed fund.
Among the short-term bond issues that had been on credit watch was $95 million the city borrowed last year to invest in the county pool. That money must be repaid in April, said city Finance Director George Ferrone.
The result of being on the credit watch means that its existing securities are difficult to sell and future borrowings would be more expensive or impossible to make.
“The city has a lot of flexibility today that we didn’t have yesterday as a result of this,†Ferrone said.
Anaheim is now able borrow money to handle any month-to-month “budget bumps.†The city has borrowed money for the past 11 years--including $24.5 million in 1994--to handle any budget adjustments, Ferrone said.
Colson said that the decision by Standard & Poor’s “helps us greatly with our cash flow and restores a great deal of normalcy to the city’s finances.â€
Having its long-term debt remain on credit watch makes it difficult for the city to borrow money for capital improvement projects or for development projects such as the baseball stadium that the city is talking about building for the California Angels.
“Any long-term bond issue would be impaired whether it be for a stadium or for storm drains,†Ferrone said.
But officials are confident their situation will improve once investors find out exactly how much of their money they will be getting back.
“If we do get the 73% of our investment back that we’re supposed to get, that should be enough to get us off of credit watch completely,†Ferrone said.
Also this week, Anaheim received a favorable report from Sandler O’Neill & Partners, a municipal sales, trading and research firm in New York, which stated, “Of all of the major lenders in the Orange County pool, Anaheim may be in the strongest position.â€
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