Second and this one is not a "prediction" so much as a certainty and the real point of this post. The major municipal bond rating agencies are very soon now going to place the entirety of California on a ratings watch with strong guidance indicating that most will get downgraded. The news is coming in so fast it is hard to keep organized. The City of Santa Barbara discovered a $3.4m shortfall in their public safety budget. Some ($700k) was overtime from the Zacca Fire but most was Prop 172 money. Prop 172 was one of those bad ideas that arise with an open initiative process. Story and ubiquicerpt:
“We didn't think there would be any reason for sales tax to decline in any great way” this fiscal year, Brown noted in explaining why the projections were originally higher. “This (drop-off) may be a corollary affect of the decline in the housing market.”Gee Mr. Brown ya think? Really bad news about this? Prop 172 is a statewide funding mechanism. EVERY single public safety agency has this same problem and hardly any even ksuspect they have a problem. Now for the tie in. Watch the COPs. No, not police officers, certificates of participation. It is possible that when these agencies go to the muni markets they will be denied. They don't have the resources to repay more debt and they can't afford performance insurance.