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One of the nation’s three major credit rating firms has downgraded the city of Chula Vista’s credit rating on the heels of worsening financial conditions brought about by the housing slump.

Standard & Poor’s knocked the city’s rating on three bond offerings from A to A- and left another offering unchanged at A.

In its report, the agency noted that Chula Vista fell below its policy of locking away 8 percent of its day-to-day budget into reserves. The slip was a result of less-than-estimated growth in tax receipts and development fees, S&P said, caused by “a considerable slowdown in the housing market as a result of general economic conditions and, in particular, the subprime mortgage industry.”

Our Kelly Bennett reported on Chula Vista’s struggle earlier this month. From her story:

The housing fever that infused individual homeowners with dreams of eternal appreciation and easy retirement also infected governments. Years of spiking values propelled homeowners to invest in vacation homes or to tap newfound equity to purchase new cars and travel the world. So too, cities, school districts and redevelopment agencies got a taste of increased revenue from property, hotel and sales taxes and spent it, budgeted for it to continue, grew to expect it. And now many must gear down the budgets they drafted mid-euphoria.

It was just last year that Chula Vista officials were boasting of financial conditions that allowed them to lure away police officers and other employees from the city San Diego, which had its credit rating dropped and then suspended.

The report added some encouraging words for the city, saying Chula Vista’s property tax base is sturdy and its management practices are strong.

From a statement released by the city:

“It’s a minor adjustment that isn’t unexpected,” said Chula Vista City Manager David Garcia. “We’re taking corrective action and fully intend to make the changes that are necessary to balance our budget. I’m convinced this situation is manageable and will be resolved in the short term.”

S&P’s action was triggered by a report from the city that a housing slowdown and lower than expected sales tax revenues and franchise fees have contributed to an unanticipated budget shortfall of $7.5-$9 million for this fiscal year. Garcia imposed a hiring freeze in July, reorganized three departments including his own, and is moving forward with a proposed early retirement plan and recommendations for across the board budget cuts.

EVAN McLAUGHLIN and ANDREW DONOHUE

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