L.A. to Run Out of Cash in a Month, Controller Says

Fitch Ratings today withdrew its AA- rating on $720 million of bonds the department planned to sell this month, according to a press release. The credit-rating company said it had assumed a rate increase in the credit assessment. The sale, which included $616 million of taxable Build America Bonds, has been postponed, according to the Fitch release.

“Today we are facing the consequences of the city’s failure to enact the necessary rate increases,” the mayor said in an e-mailed release. The lack of rate boosts will wind up “costing the ratepayers more in the long run,” he said.

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<Our take>

Unlike the Federal Government in the United States individual US states and cities are not allowed to create currency at whim and therefore had to run tighter budgets. Will the Federal Government bail out states and major cities next ?