ANAHEIM, CA-Debt-rating giant Standard & Poor's has put this tourism Mecca's debt on its “credit watch” list, the latest sign that last month's terrorist attacks on the East Coast are having a ripple effect across the nation's economy.

Attendance at Disneyland and other once-popular Anaheim venues has dropped sharply over the past few weeks, as business and leisure travelers alike cancel their planned trips in the wake of the Sept. 11 attacks. Consultants at Ernst & Young's Hospitality Group earlier this week said the city's hotel-occupancy rate has been cut nearly in half, to a mere 42%.

About 54% of Anaheim's general-fund revenue, which was expected to reach $178.3 million this year, comes from sales and hotel-bed taxes. Anaheim and other cities that depend heavily on tourism-related revenue to finance their operations could face budget shortfalls if travel doesn't pick up soon, New York-based S&P says, which in turn could jeopardize their ability to make payments to municipal bondholders.

Only Anaheim's $8.2-million in general-revenue bond debt is effected by S&P's move, the credit-rating company says. A $510-million bond that was floated to pay for improvements to the Anaheim Convention Center and other parts of the 1,100-acre Anaheim Resort project is not affected because the debt is insured through a private carrier.

Moving the general-revenue debt to “credit watch” status does not necessarily mean that the debt itself will soon be downgraded. The watch rating could be lifted if the city's finances turn around soon, credit experts say.

Nonetheless, Anaheim's presence on the credit watch list could make it more difficult for the city to raise cash through future bond offerings. And if its current AA rating is indeed cut, the city would have to pay higher rates to attract future bond buyers and pay more to refinance its current debt.

Instant Insights /

Anaheim Placed on S&P Credit Watch List

Related Stories

Recommended For You