AZUSA (CITY OF) CA -- Moody's Upgrades City of Azusa, CA's COPs Series 2003 to Baa3 from Ba2; Stable Outlook

New York, October 04, 2016 -- Moody's Investors Service has upgraded the City of Azusa, CA's Certificates of Participation Series 2003 to Baa3 from Ba2. The two notch difference between the City's Baa1 Issuer Rating (implied GO rating) and lease-backed obligation rating reflects the standard legal structure for these California abatement lease financings and "more essential" leased assets, as well as an additional consideration for the City's level of fiscal stress. Without a loan from the City's water enterprise, the City's unrestricted cash balance would be close to zero (fiscal 2015). Additionally, its general fund balance consists largely of land assets and advances to its Successor Agency, and therefore non-spendable. The leased assets include City Hall and the City's Senior Center. The notching also reflects certain strong legal features of California general obligation bonds that are not shared by lease-backed obligations.

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