Standard & Poor’s 500 downgraded its credit rating of city of Los Angeles general obligation bonds, citing its “weakening financial position and an emerging structural imbalance.” Los Angeles faces a $1 billion deficit, having burned through its once-record reserves in just two years.
Los Angeles Mayor Karen Bass is currently seeking a state bailout, but given that the state says it has “no capacity” for new spending commitments, it’s unclear if the funding will materialize.
S&P warns that if trends continue, it could further downgrade the city’s credit rating, which would further increase borrowing costs due to higher associated risk of default.
