City Manager Blindsided by Moody's Ratings Review; Says Town's Credit Rating Not at Risk

Danville town manager Joe Calabrigo spent part of his Tuesday on the phone with officials with Moody's Investors Services, trying to understand why one of the nation's leading credit agencies announced Monday they would be reviewing Danville's — and about 30 other California cities — credit ratings.

"We didn't know about this until (Moody's) announced it publicly," Calabrigo said. "We are just learning about it, but I don't believe it is going to affect the town or our investors and their obligations."

Calabrigo said Moody's has assured him the town's overall credit rating is not at risk of a downgrade. Danville has a credit rating of AA1, considered strong for a town of Danville's size, Calabrigo said.

What is under review is the credit ratings of what are called "Certificates of Participation," used by the town to fund redevelopment projects.

Specifically, there are two debt Certificates of Participation that Moody's is zeroing in on. One, a 2001 $6.7 million investment in downtown improvement projects, and the other a 2005 $5.6 million investment to fund the public parking lot on 282 Front Street.

The credit ratings for both of those Certificates of Participation are AA2 (one rating below AA1).

"What has been communicated to me is this doesn't have anything to do with the town's finances, which are strong," Calabrigo said. "Instead, Moody's is looking at the economic conditions in the state and looking at how they are impacting cities in the state in general. They are calling it a 'recalibration of their methodology.'"

When asked what would be the consequences to the town if the ratings for Certificates of Participation were downgraded, Calabrigo said:

Since the town's credit worthiness is not being considered for downgrading, there are no consequences to the town... the town's finances are very positive."

On Wednesday night, Calabrigo released an open letter on the town's website explaining the situation and closed it by saying, "The Town is confident that the review to be conducted by Moody's will continue to support the highest possible rating for these outstanding debts."

Along with Danville, Moody's is reviewing various credit ratings for five other Bay Area cities — Los Gatos, Berkeley, Martinez, Oakland, Petaluma and San Leandro — and more than 30 statewide.

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