Here's something you might be interested in.
The October 11 City Council agenda includes an informational item on council member training in debt servicing. Fitch Ratings will be sending Amy S. Doppelt, a managing director who can explain to council members the terminology and usage in how Fitch Ratings looks at the credit worthiness of individual municipal general obligations. The council members are required to receive four training sessions annually on a variety of financial and ethical issues.
For taxpaying members of the public and journalists in particular, council member training on debt servicing by Fitch Ratings puts a whole basket of issues on the table, right in time for a city vote on whether we actually need a half cent raise in our city's sales tax rate. For Fitch Ratings, our willingness to impose sales tax increases to service debt is a major economic driving factor in Fitch's evaluation of the local economy, where Fitch also considers municipal debt and other long-term liabilities, finances, management and administration rating factors in addition to economic rating factors.
With Fitch Ratings providing its U.S. Local Government Tax-Supported Rating Criteria (December 21, 2009) and other materials as supporting documents to public business, now anybody who can download a PDF can keep up with the buzzwords, concepts, and standard procedures that the politicians in office are now accountable for knowing, understanding, and hopefully using for managing to make improvements in the financial state of San Diego.
Of course, if the politicians in office don't, Fitch Ratings will darn sure want to know about it, pronto.
The Crash of 2008 was a change in business for the American economy. Regardless of the causes and the individuals who designed, implemented and triggered the conditions for those causes, the net effect for financial institutions, investors, regulators, and ordinary Americans are still developing.
As the near market failure was happening two years ago, many trading technicians expressed the opinion that they would love to see a v-shaped recovery, where the swiftness of the collapse from DJIA 14000 would be matched by the swiftness of the rise back to DJIA 14000. This has so far proven to be elusive, and the v-shaped recovery turned into more like a modest, nearly sideways jobless recovery in the stock market while unemployment remains high, business willingness to hire and invest in expansion remains low, and wary consumers remain cautious with cash while those still with discretionary income pay down debt and cut credit cards.
San Diego's current credit rating by Fitch of AA- needs to be understood in the revised process of arriving at those ratings. In April 2010 as related by Doppelt, Fitch chose, on observing a low municipal bond default rate during and after 2008 compared to other existing debt, to recalibrate by raising the ratings of all state, local government tax supported, water/sewer, public higher education, and public power (distribution only) general obligation and other debt. Fitch did this without a case by case evaluation of individual debt issues and without taking any action with regard to the government units that issued the debt. Fitch states that San Diego's rating outlook is stable. Historically for San Diego, the rating was at a high of AAA in May 2002 but fell to AA with Negative Outlook by February 2004. San Diego was again downgraded in February 2005 to A and then to BBB+ only three months later, after Fitch issued its Ratings Watch Negative advisory on San Diego in September 2004.
In March 2008, Fitch upgraded San Diego's rating watch to Positive, and as audits were published, raised San Diego's credit rating to A+ in December 2008, along with a ratings watch advisory upgrade to Stable. On recalibration without review or action by Fitch, San Diego was upgraded to the current AA- credit rating in April earlier this year, with no additional revisions of its advisory comments on San Diego.
Politically, it can be argued that San Diego's credit rating went up to AA- this year. Financially, it doesn't really mean much because all other state and local debt was upgraded at the same time for, according to Fitch, no good individual reason.
In terms of future ratings made by Fitch or any other rating agency, it may be instructive to look at the concerns a rating agency like Fitch might have about San Diego, our local economy, our city's debt and long-term liabilities, and municipal financing, management and administration. There are many, many issues here, all worth blogging about before the election and our vote on Proposition D:
See also:
"How the Big Redevelopment Deal Affects Prop. D" by Liam Dillon, Voice of San Diego
The October 11 City Council agenda includes an informational item on council member training in debt servicing. Fitch Ratings will be sending Amy S. Doppelt, a managing director who can explain to council members the terminology and usage in how Fitch Ratings looks at the credit worthiness of individual municipal general obligations. The council members are required to receive four training sessions annually on a variety of financial and ethical issues.
For taxpaying members of the public and journalists in particular, council member training on debt servicing by Fitch Ratings puts a whole basket of issues on the table, right in time for a city vote on whether we actually need a half cent raise in our city's sales tax rate. For Fitch Ratings, our willingness to impose sales tax increases to service debt is a major economic driving factor in Fitch's evaluation of the local economy, where Fitch also considers municipal debt and other long-term liabilities, finances, management and administration rating factors in addition to economic rating factors.
With Fitch Ratings providing its U.S. Local Government Tax-Supported Rating Criteria (December 21, 2009) and other materials as supporting documents to public business, now anybody who can download a PDF can keep up with the buzzwords, concepts, and standard procedures that the politicians in office are now accountable for knowing, understanding, and hopefully using for managing to make improvements in the financial state of San Diego.
Of course, if the politicians in office don't, Fitch Ratings will darn sure want to know about it, pronto.
The Crash of 2008 was a change in business for the American economy. Regardless of the causes and the individuals who designed, implemented and triggered the conditions for those causes, the net effect for financial institutions, investors, regulators, and ordinary Americans are still developing.
As the near market failure was happening two years ago, many trading technicians expressed the opinion that they would love to see a v-shaped recovery, where the swiftness of the collapse from DJIA 14000 would be matched by the swiftness of the rise back to DJIA 14000. This has so far proven to be elusive, and the v-shaped recovery turned into more like a modest, nearly sideways jobless recovery in the stock market while unemployment remains high, business willingness to hire and invest in expansion remains low, and wary consumers remain cautious with cash while those still with discretionary income pay down debt and cut credit cards.
San Diego's current credit rating by Fitch of AA- needs to be understood in the revised process of arriving at those ratings. In April 2010 as related by Doppelt, Fitch chose, on observing a low municipal bond default rate during and after 2008 compared to other existing debt, to recalibrate by raising the ratings of all state, local government tax supported, water/sewer, public higher education, and public power (distribution only) general obligation and other debt. Fitch did this without a case by case evaluation of individual debt issues and without taking any action with regard to the government units that issued the debt. Fitch states that San Diego's rating outlook is stable. Historically for San Diego, the rating was at a high of AAA in May 2002 but fell to AA with Negative Outlook by February 2004. San Diego was again downgraded in February 2005 to A and then to BBB+ only three months later, after Fitch issued its Ratings Watch Negative advisory on San Diego in September 2004.
In March 2008, Fitch upgraded San Diego's rating watch to Positive, and as audits were published, raised San Diego's credit rating to A+ in December 2008, along with a ratings watch advisory upgrade to Stable. On recalibration without review or action by Fitch, San Diego was upgraded to the current AA- credit rating in April earlier this year, with no additional revisions of its advisory comments on San Diego.
Politically, it can be argued that San Diego's credit rating went up to AA- this year. Financially, it doesn't really mean much because all other state and local debt was upgraded at the same time for, according to Fitch, no good individual reason.
In terms of future ratings made by Fitch or any other rating agency, it may be instructive to look at the concerns a rating agency like Fitch might have about San Diego, our local economy, our city's debt and long-term liabilities, and municipal financing, management and administration. There are many, many issues here, all worth blogging about before the election and our vote on Proposition D:
See also:
"How the Big Redevelopment Deal Affects Prop. D" by Liam Dillon, Voice of San Diego