California cities recovering from recession but unevenly, report says

Thu Dec 11, 2014 12:00pm EST
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By Robin Respaut

Dec 11 (Reuters) - Cities in California as a whole are largely recovering from the recession but not all with the same vigor.

Urban coastal regions have enjoyed job and economic growth more than inland and rural counterparts, according to a new report by Standard & Poor's Ratings Services.

A disproportionately large share of California cities have received S&P's highest ratings compared with the rest of the country, thanks to the Golden State's strong economy and higher income and wealth levels.

But the health of California's cities diverges, with more cities at the top of the rating spectrum than the national average but also more distressed cities toward the bottom compared with other states.

Cities in the Central Valley, the far north, and the Inland Empire "may continue to face challenges as they seek to balance spending pressure with slower revenue growth," S&P reported on Thursday.

The impact has been uneven. In Los Angeles County, for example, revenue hit its pre-recession peak, while Sonoma County's tourism and agriculture sales tax base had not yet fully recovered by the end of last year. San Bernardino has just returned to where it was in 2007, S&P reported.

In 2013, the gap between high-income households and very low-income households was greater in California than in the United States as a whole, according to the state's Legislative Analyst's Office.

The rating agency noticed that some cities were still cutting their budgets to adjust to slower revenue growth in the wake of the recession. But in an effort to be fiscally conservative during lean times, many cities have deferred spending on capital projects. That may increase budgetary flexibility in the short run but may constrain it over time as projects grow urgent, S&P warned. (Reporting by Robin Respaut; Editing by Cynthia Osterman)