California's financial crisis prompted Los Angeles County on Wednesday to delay plans to borrow $1.1 billion by selling short-term notes, saying it wanted to give investors more information about the potential effects on county finances from state budget cuts.
The county routinely borrows money at this time of year via so-called tax and revenue anticipation notes, which provide a cash bridge to cover expenses until expected tax payments come in.
The note sale had been scheduled for Thursday. But Glenn Byers, assistant treasurer for the county, said officials wanted to go back to Wall Street investors to brief them on the state's latest cost-cutting proposals.
He said the county now hoped to get the note sale done late next week.
One of Gov. Arnold Schwarzenegger's proposals is to slash the CalWorks aid program, which mostly assists single mothers with children. If CalWorks ended altogether -- although that seems unlikely given Democratic opposition -- affected mothers probably would shift to counties' general relief welfare programs, costing L.A. County $400 million or more a year, Byers said.
Municipal market investors "are already spooked" by California's mess, Byers said. "This is more noise."
Yields on the state's general obligation bonds have jumped over the last week amid growing investor concern about the budget debacle.
L.A. County, however, has long had a solid financial reputation on Wall Street. Its short-term notes have the highest ratings from credit-rating firms Standard & Poor's and Moody's Investors Service. The county expected to pay a modest 0.5% annualized tax-free interest rate on the new notes.
By contrast, California, which has the lowest credit rating among the 50 states, may have to pay 5% or more when it issues an estimated $10 billion in one-to-two-year notes in July.
To preserve L.A. County's ratings and a low interest rate, Byers said county officials would emphasize to investors that "as the state makes cuts, we will make cuts."
He noted that "all of the counties are in the same boat. . . . It's really ugly."