Moody's has cut the outlook on the city's credit rating to "stable" from "positive," which is not the end of the world (the actual rating is a solid Aa2), but enough to possibly boost borrowing costs. Real estate is the culprit, according to the LAT's Money & Co. In a nutshell, property tax delinquencies are likely to be up in the coming year, which means a likely shortfall in property tax revenues – not what the ratings agencies like to see.
Moody’s said the cut in the outlook on the city’s $3.2 billion in bond debt reflected "the sharpness of the city’s economic slowdown and the fiscal challenges this presents for the city in balancing its budget." The fiscal 2009 budget, Moody’s noted, was balanced in part with one-time fixes, including land sales. But that could make the expected 2010 gap harder to close, said Moody’s analyst Eric Hoffmann. As for the real estate market, Hoffmann noted that "while the downturn is still not as severe as in the outer areas of the region, nor do we expect it to be in the future, median home prices in the city are down around 20% from their peak last summer."