Credit Rating Drop Costs City $350K

The city’s fight over pension reform and dwindling reserves resulted in San Jose’s credit being downgraded by Moody’s Investment Service in New York. The impact, according to City Manager Debra Figone at Tuesday’s City Council meeting, will be a cost of $350,000 to the city.

“Unfortunately, the action by Moody’s will increase our letter-of-credit fees,” Figone said, according to a Mercury News report.

Moody cheered San Jose’s aggressive approach to reigning in pension and retirement benefits costs through Measure B, but the uncertainty caused by legal challenges was too much to keep San Jose’s credit listed as Aaa. The downgrade moves San Jose to a Aa1 rating. Last year, Fitch Ratings made a similar downgrade in San Jose’s credit rating.

Josh Koehn is a former managing editor for San Jose Inside and Metro Silicon Valley.

7 Comments

  1. Just goes to show us how much Chuck and his followers have continued to flush this city and citizens down the drain.  And he still thinks the A’s will solve all of our problems.  It’s time to stand up SJ to all this BS.  And where is this money coming from for Chuck and his train in todays news?

  2. way to go on subjecting the city to more expenses which I assume will be blamed on the city workers. A negotiated deal would not have caused this and would have resulted in quick resolution leading to immediate savings. The offers of the SJ unions are better than those offered by other municipalities which have been accepted; thereby avoiding legal challenges, uncertainty, and the hostile environment created by the all out attack on labor.

  3. The article says that Moody “cheered SJ’s aggressive approach”, in other words, they approve of the deal on the table.  But since the Union would not accept the deal, and is now challenging it in court, making Moody “uncertain” if the deal will go through, they downgraded our credit rating, costing us more money.  This article makes it perfectly clear that this result was caused by the actions of the Union.

    And don’t try to detract from this fact by pointing to other issues such as the A’s or any other issue you don’t agree with.  The fact remains that the citizens of San Jose do not have enough money in our pockets to pay the salaries of current employees AND all people who ever worked for the city – for as long as they live.  Just like all private business employees, govt employees must save and plan for their own retirement – it is their own responsibility.

    • “Just like all private business employees, govt employees must save and plan for their own retirement – it is their own responsibility”.-LoveSanJose

        And your statement makes it sound like the employee Unions are at the bottom of this whole problem.  When you adjust for the fact that San Jose Employees put 14% of their income into retirement, Public Safety receives NO social Security, Deferred Compensation plans have been reduced because of paycuts (up to 21% by public safety employees), it becomes obvious that employees have borne the brunt of the City Budget cuts. Aside from the fact that it was a negotiated contract, and that they are not obligated to accept the draconian measures suggested by the City Council, Mayor and City Manager (inflated numbers, cronyism, false and misleading information to the public…etc)just because “Moodys” thinks its a great idea.  The retirement changes and compensation offered by the Unions was MORE than adequate to save money, allow for the credit companies to keep their ratings high, and foster good will all around.  How much have your taxes increased (City) over the last 10 years?  None.  Its just been funneled to pet projects.  The Police and Fire ranks have SHRUNK by 16% or more…..their jobs have not gotten easier, or the call volume less.  Compare that to the private sector.
        By the way, its only “perfectly clear” in your mind, definitely not mine.

    • Before you say this is the union’s fault, you need to be sure that you have analyzed the following:
      1) the current state of the pension issue and the actual numbers (both to make it sustainable and make up for the unfunded liability amortized over a fair period of time)(for example the stanford study says that the police and fire fund is properly funded )
      2) how much money in givebacks from the unions does the city actually need to make it sustainable and to make up the alleged unfunded liability
      3) the unions’ proposals (all of them have provided proposals which provide hundreds of millions in savings)
      4) the city’s proposal to understand that it likely goes far beyond what is necessary for sustainted reform.

    • “But since the Union would not accept the deal, and is now challenging it in court…”

      And in that statement is the problem…. You’re assertion that any Union should “accept” a deal is NOT negotiations.  That is a demand and goes against any form of bargaining structure ever conceived…. The fundamental problem in this City is that they don’t know how to Collectively Bargain. Period.

      LoveSanJose, you have been fed the kool-aid….  The Unions are not the problem, Chuck and his coconspirators are…

    • Get out your checkbook, Mr Magoo because you are just one more fish that’s going to be paying for Greeds scams once independent thinkers dissect his crazy illegal ideas and rule in the favor of the contracted agreements. Only a stupefied delusional moron would think that they can capriciously reneg on a contract. But then again, Greeds plan is probably intended to end up in a lawsuit so that he can channel more city money to his law school pals who will be awarded the contract to fight the unions in court.  They will all thank Greed for the billable hours. When the lawyer bills hit 650 million, Greed will walk on as a partner in the law firm he’s going to help earn serious cash. All on your back “Love San Jose”