The city of Los Angeles' credit rating was downgraded on Tuesday by Fitch Rating, which cited an expected budget deficit that would amount to nearly one-tenth of revenue next year.
According to Bloomberg, the lowered score covers nearly $3 billion in debt. And, although that might not be much for a city that spends about $1 million more a day than it takes in, it could have a snowball effect: interest rates could rise and credit lines could become more hard to come by as a result.
Ratings went from AA to AA- on $1.5 billon of general obligation bonds and from AA- to the lower A+ on more than $1 billion worth of municipal bonds, obligation bonds and debt sold for the Los Angeles Convention and Exhibition Center Authority.
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"The downgraded ratings reflect the city's reduced general fund reserves and the limited ability to replenish them given the city's weakened economy ... ," Fitch stated.