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What S&P Says About SD

Published: Thursday, May 15, 2008 1:08 PM PDT

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We finally got word directly from Standard & Poor's on today's news that it had lifted its suspension of the city of San Diego's credit rating.

The end of the nearly four-year suspension opens the door for the city to return to Wall Street.

Here's what the credit rating agency said about its upgrade:

The positive outlook reflects the expectation that recent improvements in city management practices have begun to address the city's long-term financial challenges, as well as the expectation that the city's audited financial statements for fiscals 2007 and 2008 will be released, as planned, in the next two to seven months. Should management continue to make necessary budgetary adjustments to offset projected budgetary gaps and target structural balance and financial stability, we could raise the rating into the next category.

A further boost in the city's credit rating, which is currently A for its general bonds, would lower its interest rates.

The rating agency said San Diego's fiscal outlook is buoyed by a diverse regional economy; strong wealth and income indicators; good reserve levels and recent management improvements; and a moderate overall debt burden.

It tempered those strengths by noting the region's housing bust; weaknesses in the city's internal financial controls; its limited revenue-raising options; and its long-term debts such as deferred maintenance and pension and retiree health care obligations.

Read S&P's full report here and its brief release here.