Moody’s Investors Service Targets Los Gatos For Possible Downgrade

Moody's Investors Service has targeted Los Gatos and six other towns in the Bay Area for review of its bonds, the company announced in a statement.

The six municipalities in the Bay Area, along with Los Gatos, are Berkeley, Danville, Martinez, Oakland, Petaluma and San Leandro. They are all among 30 California cities that Moody's intends to scrutinize.

The company's scrutiny comes at time when several towns have declared bankruptcies such as Stockton, San Bernardino and Mammoth Lakes.

“Moody's review of dozens of cities across California is understandable given the state's repeated fiscal attacks on local government, including the unprecedented destruction of redevelopment that will take nearly $15 million from Los Gatos this year alone, said Los Gatos Town Manager Greg Larson in response to the news.

"Fortunately, our fundamentals remain strong, with property tax revenues again starting to grow as the economy recovers," Larson added.

Los Gatos has also added to its fiscal budget reserves every year during the Great Recession and has already implemented a two-tier pension system with lower benefits, he said. 

The town has also not issued any general obligation or pension bonds, and Los Gatos' redevelopment debt rating is among the highest in the state, Larson noted.

If Los Gatos' ratings are downgraded, it will become harder for the municipality to borrow for future infrastructure projects, the credit rating agency said.

Correction: This article has been changed. An earlier version mistated Los Gatos redevelopment debt, when it meant to say that its debt rating, like a credit rating, is one of the highest in the state, which is a good thing. Everyone makes mistakes, even us. If you see anything else that is amiss, please email Editor Sheila Sanchez at sheila.sanchez@patch.com.