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.
“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.