Moody's Investors Service has upgraded the City of Inglewood’s Lease Revenue Bonds Series 2012 from Baa1 to A2. This is Inglewood’s second upgrade of lease revenue bonds. In February 2015, Moody’s upgraded both the City's lease revenue bonds and pension obligation bonds from Baa2 to Baa1.
Moody’s noted, “The rating upgrade incorporates the city's ongoing steps toward fiscal balance, most significant of which has included expenditure cuts, staff downsizing, and controlling unfunded liabilities. The large size and diversity of the City's tax base and key location in the Los Angeles area economy are key credit strengths underlying the issuer rating.”
“The value of the City receiving a higher bond rating by Moody’s is similar to a resident having a high FICO score. The higher the FICO score, the better interest rate you get on purchases,” City Manager Artie Fields explained.
“In the case of the City, if the Council were to go out and get new bonds or refinance bonds, the City would receive a better interest rate based on our upgraded bond rating. Overall, the increased rating by Moody’s demonstrates that the City is building back our financial strength.”
Inglewood’s issuer rating was also upgraded by the agency in 2015, from A2 to Al.
“This is our second upgrade by Moody's in two years. This particular increase means that the series issue in 2012 is considered a safer investment now than when the bonds were issued, reflecting the improvement in the City's financial position,” Mayor James Butts said.
The A2 lease revenue bond rating is one notch lower than the City's A1 issuer rating. The one notch distinction reflects a standard legal structure for a California abatement lease financing and leased assets that the credit rating agency views as "more essential." The one notch also reflects the strong legal features of California general obligation bonds that are not shared by lease revenue debt. This rating action affects approximately $28 million in outstanding debt.
This action concludes a review undertaken in conjunction with the publication on July 26, 2016 of the Lease, Appropriation, Moral Obligation, and Comparable Debt of US State and Local Governments Methodology.
The lease revenue bonds are secured by lease payments made by the City of Inglewood for use and occupancy of the leased assets. The assets are City Hall/Emergency Operations Center, a police building, the City's Main Library and surface parking.