S&P Global Ratings has downgraded Los Angeles' bond ratings amid a looming $1 billion budget deficit and concerns over its weakening financial situation. The city's general obligation bonds have been lowered from AA to AA-, while lease revenue bonds dropped from AA- to A+. S&P highlighted the rapid decline of the reserve fund to 3.22%, below the minimum 5% threshold. Mayor Karen Bass proposed budget cuts, including potential layoffs of 1,650 city workers, in an effort to address the financial challenges.
The downgrade reflects the city's weakening financial position and an emerging structural imbalance, as well as concerns about the rapid deterioration of the city's reserve fund.
Lower bond ratings typically translate to higher interest rates, making it more expensive for the city to borrow money, impacting future financial flexibility.
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