The long-term financial outlook for the city of 39,000 southeast of downtown Los Angeles is murky: The state controller’s office has found that Bell collected about $5.6 million in illegally imposed tax increases and business-license fees – and now must refund an amount equal to more than one-third of its $13.5-million general fund. As city officials work on plans to refund the money, they also must find a way to balance the budget to adjust for the loss of the illegal tax revenue. That could mean cutting jobs or services, or raising revenue through bonds.
The latter option became less viable Tuesday when a Wall Street rating firm cast new doubt on Bell’s ability to pay its existing debts, including a $35-million bond repayment due Nov. 1. Fitch Ratings downgraded its outlook on $57 million of Bell bonds, citing “financial weakness” and fallout from the salary scandal and illegal property tax hikes. In August, Standard & Poor’s downgraded Bell’s bonds to junk status.
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