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Moody’s Is Taking Another Look At California Cities

Aired 8/21/12 on KPBS News.

A major credit rating agency says it’s concerned more California cities will file for bankruptcy. But a local economist says San Diego isn’t likely to be one of them.

— A major credit rating agency says it’s concerned more California cities will file for bankruptcy. But a local economist said San Diego isn’t likely to be one of them.

So far three cities in California have filed for bankruptcy. And credit rating agency Moody’s is concerned more will follow. In a news release, the company said the state’s dysfunctional economic policy “effectively lays out a path to bankruptcy court for stressed municipalities.”

It plans to reevaluate the financial situation of every California city in September.

But University of San Diego economics professor Alan Gin said San Diego has made progress in shoring up its finances.

"I think a few years ago it would have been a more serious problem for San Diego," he said. "But I think some steps have been taken to try to deal with the situation here. And so now I think we’re at less risk than other cities in California."

However, Gin said San Diego could be tarnished if it’s associated with cities Moody’s finds are on shaky financial ground.

San Diego was shut out of the municipal bond market for four years beginning in 2004. But since then its finances have improved and Moody's now gives the city an Aa3 rating with a stable outlook.

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