Standard & Poor's headquarters in the financial district of… (Stan Honda / AFP/Getty Images )
Los Angeles, which recently saw its $7-billion investment portfolio downgraded by Standard & Poor's, has decided to no longer hire the rating company to rate the soundness of the city's investments.
"We have really lost faith in S&P's judgment," Interim Treasurer Steve Ongele said.
After its downgrade of U.S. debt last week, S&P cut its rating of L.A.'s general investment pool to AA from AAA. It also downgraded dozens of other municipalities with large investments in U.S. Treasury notes.
One of them, Northern California's San Mateo County, has decided not to renew its contract with S&P. Florida's Manatee County has also dropped its contract with the company, according to news reports.
Speaking before the City Council's Budget and Finance Committee meeting Monday, Ongele said Los Angeles should be proud for cutting ties with S&P.
"The market crash that came with the real estate debacle, it happened because folks like S&P rated AAA corporations that were not worth much of anything, corporations that are no longer there today," Ongele said. "The fact that we have the courage to do this, the fact that we are the first city, I think that's a big bragging right."
But Councilman Bernard C. Parks, who chairs the budget committee, said it would be unwise for city officials to boast about canceling one contract with S&P, considering that it still has another: The city will continue to seek ratings on its general obligation bonds from S&P and two other rating companies.
"I would caution that we not celebrate, because that same company has to rate our debt," Parks said.
According to Ongele, Los Angeles can live without S&P's rating because it provides a monthly report to the public that details its investments. He said canceling the contract would save the city $16,000 each year.