The financial services company Standard & Poor’s upgraded Chula Vista’s credit rating on June 5 from an A-minus to an A after the city showed some financial stability.
An A rating is beneficial to the city when applying for loans because Chula Vista will have a better chance at securing a loan at the lowest interest rate possible.
To get awarded the A rating, the city had to stabilize its use of operating reserves, refinance some of its debt for savings, and implement pension reform, which now means employees pick up their share of pension costs, Chula Vista’s Finance Director Maria Kachadoorian said.
“They basically wanted to make sure that when we ended the year, we didn’t spend more than we brought in,” Kachadoorian said.
According to the Standard & Poor’s ratings system, an A rating for Chula Vista means that the city has a “strong capacity to meet financial commitments, but is somewhat susceptible to adverse economic conditions and changes in circumstances.”
Standard & Poor’s also saw the city of Chula Vista’s participation in the San Diego area’s broad economic base. The city also has above average income in wealth indicators.
The finance director said Standard & Poor’s main reason for giving the city of Chula Vista an A-minus rating in 2007 was the financial service company was concerned with Chula Vista’s ability to stabilize use of its operating reserves.
Kachadoorian said Standard & Poor’s was concerned that Chula Vista’s reserve fund had dropped too low during the economic crisis of a few years ago.
Kachadoorian said a reserve fund is used in time of financial crisis or for unanticipated events like emergency repairs or for litigation. The city, Kachadoorian said, needs to have money set aside to pay for these things.
“If you don’t have money available to address those one-time emergency situations, then what happens is we have to make reductions in staffing, which then results in service impacts to the community,” Kachadoorian said. “You clearly don’t want to shut down a library in order to pay for unanticipated repairs.”
The finance director said the city’s financial focus over the past few years has been stabilizing the use of the city’s reserves to balance the budget.
Kachadoorian said over time, the goal of the city is for it to reach 15 percent in operating reserves.