California Cities Poised for Economic Recovery, S&P Says

Most California cities will be recovering this year from the lingering effects of the longest recession since World War II and those with revenue gains will probably see credit quality improve, Standard & Poor’s said.

Cities in the largest U.S. state by population hit a low point in the municipal economic cycle last year, the New York-based rating company said. Of 202 cities that S&P rates, 22 were downgraded, including four to speculative grade from investment grade.

Communities in California have struggled to stay afloat by cutting staff and services to make up for a drop in sales levies and property tax revenue in the wake of the 18-month recession that ended in 2009. Stockton, San Bernardino and Mammoth Lakes filed for bankruptcy protection.

“Despite the trio of bankruptcy protection filings in the state last year, most California cities absorbed the impact of the Great Recession and preserved their credit quality,” S&P said in a report today. “The small number of municipal bankruptcies is a testimony to the resilience of local governments and their ability and willingness to scale back expenditures and align them with lower revenues.”

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