Moody's Could Lower Berkeley's Credit Rating

Berkeley is one of the 30 California municipalities that could see its credit rating downgraded by one of the nation's leading credit rating agencies, the Associated Press reported Tuesday.

According to Moody's Investors Service, a downgrade for Berkeley would increase borrowing costs and could make it more difficult to borrow for infrastructure projects.

The bond-rating agency creates the equivalent of credit scores for large borrowers like government agencies and corporations. The other municipalities in the Bay Area being targetted are Los Gatos, Danville, Martinez, Oakland, Petaluma and San Leandro. They are all among 30 California cities that Moody's intends to scrutinize.

In a statement, Eric Hoffmann, who heads Moody's California local government ratings team, said:

California cities operate under more rigid revenue raising constraints than cities in many other parts of the country. Combined with steeply rising costs, these constraints mean that these cities will likely recover more slowly than their peers nationally, even if the state's economic recovery tracks the nation's.

The company's scrutiny comes at time when several towns have declared bankruptcies such as Stockton, San Bernardino and Mammoth Lakes.