Tuesday, September 04, 2012

S&P Affirms Rancho Santa Margarita's COP AA+ Rating

Posted By CotoBlogzz

Rancho Santa Margarita, CA at a time when California is in survival mode with investors, like Warren Buffett, dumping California's municipal  bonds after California sales tax revenue nose-dived by 33.5%, and as Chriss Street might say, “The state is going to pound the California cities and counties for every penny it can get.”  At it only gets worse.  On July 10, 2012,  San Bernardino became the third California city in less than two weeks to file municipal bankruptcy protection, with Stockton and Mammoth Lakes preceding it, when the city council voted opted for bankruptcy protection in the face of a $45-million budget shortfall.  Stockton’s shortfall at the time of filing was  $26 million budget shortfall.

And Mammoth Lakes sought bankruptcy protection from a $43 million court judgment.

So, when Standard & Poor’s Primary Credit Analyst, DanielJ. Zuccarello, says  that the City of Rancho Santa Margarita’s  Certificates of Participation (COP) as AA+ rating  reflects 
maintenance of very strong available General Fund reserves, supported by good financial management policies and practices,’ and that   "the stable outlook reflects Standard & Poor's opinion of the City's willingness to make the budget adjustments necessary to maintain stable operations, supported by very strong General Fund reserves that exceed 103% of operating expenditures,” 
as Vice President Joe Biden might say, It is a Big Deal!

RSM City Manager Jen Cervantez
For his part,  Mayor Beall says of the strong rating: “At a time when so many cities are drowning in debt and deficit, we are proud Rancho Santa Margarita is financially strong  – we have the highest possible credit rating, a balanced budget and finished last year with $1.2 million dollar surplus and $19 million in reserves"

where as City Manager  Jennifer Cervantez opined:  “It is extremely gratifying that Standard & Poor’s continues to recognize the hard work of the City Council and staff to prudently manage the City’s finances."

Kudos to the City for a strong position in an otherwise bleak environment!

We wanted to see  if  the Rancho's City Council’s actions could be documented and patented – that is, we wanted to know if the law of attributions would hold true in this case,  so we asked the City  if it could point to specific policies it has implemented that might have resulted in S&P’s AA+ rating affirmation and go the following response, particularly going forward as nearly one in three homes in the city is under water.

 Possible reasons for the City's COP AA+ rating according to RSM's spokesperson Molly McLaughlin:

1)      The City Council  adopted pension reform

2)      The Council’s creation of a comprehensive Reserves Policy with cornerstones in: Sustainability, Accountability and Transparency  - the latter, a key piece of open-meeting budget workshop deliberations each year

3)      Maintained conservative economic assumptions during the budget workshops to ensure fiscal sustainability;

4)      Encouraged staff to pursue one-time revenues including CFD reimbursement and  Edison energy credits;
5)      Maintained current staffing and salary levels; and
6)      Recruited a city manager and negotiated a “no-frills” contract.

Now, given the economic conditions in the area, where 35% of all homes in Ranch Santa Margarita, 

Coto de Caza's Homes Under Water
RSM's Homes Under Water 
Ladera Ranch's Homes Under Water

 we wanted to know why since the City Council has  been receiving benefits including, full Medical, Dental, Vision, and Retirement, along with a stipend and additional pay for  sitting on county boards while working part time, it has not reformed – or as RSM City Council candidate Hrabick says “  I believe the council should be willing to serve for their monthly stipend of $463.50.  Our planning commissioners serve gladly and earn only $75.00 per meeting.

Now there seems to be a pattern between the City Council members advocating pension reform and terms limits, or as we refer to the Old Vs. The New:

The Old:  Against City Pension Reform for council members, against term limits.
The New - for Pension Reform for council members, for term limits
RSM Mayo Tony Beall
Kenney Hrabik - Vying for open  4-year seat
Carol Gamble
Steve Baric
Jerry Holloway
Jerry Holloway
Jesse Petrilla
Jesse Petrilla

Whatever your views on pension reform and terms limits, you cannot argue with success, and while credit rating agencies do not have a stellar reputation, this is a Big Deal!



California State Controller John Chiang announced that the cities of Milpitas and Morgan Hill illegally tried to convert hundreds of millions of dollars of real estate, cash and investments that were required to be turned over to the State of California after  Governor Jerry Brown and the State Legislature passed Assembly Bill 1x 26, terminating all municipal 
redevelopment agencies to help cover a $25 billion budget shortfall.  Before the Controller’s audits, the state had collected less than $400 million of the $3 billion they expected from the state’s 400 community redevelopment agencies.   The State Controller’s charges against two small towns are a home run for the state, but are a financial nightmare that will  pound cities and counties across the state. 


Coto de Caza, CA – One in  four homeowners in Coto de Caza/Dove Canyon owe more on their loans than their homes are worth, according to a new analysis from real estate tracking firm Zillow

When homeowners walk away from their loans or pursue a short sale, something common in Coto de Caza/Dove Canyon,  they push home prices lower, feeding a cycle that has hampered the Southern California real estate market for years.

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