Moody's Investors Service downgraded San Francisco's credit rating, indicating the city's sluggish recovery from the virus pandemic and the ongoing tech exodus, wreaking havoc on the commercial real estate market. Not mentioned in the report is the crime and chaos sparked by disastrous policies pushed forward by radical leftists in City Hall, which have only transformed some parts of the city into third-world conditions.
Bloomberg reports that Moody's downgraded San Fran's credit rating to Aa1 from Aaa. This might trigger an avalanche of other downgrades from credit rating agencies in the weeks and or months ahead. Both S&P Global Ratings and Fitch Ratings maintain AAA grades as of Wednseday.
Analysts at Moody's explained their decision for the downgrade:
"The sea change in office employment to a hybrid work model and reduction in commuting to the city's office core have led to reduced economic activity, very high vacancy rates, and depressed rents."
The credit rating downgrade is just the latest challenge facing Mayor London Breed, who recently had to close a $789 million deficit in a new two-year budget cycle. This downgrade will only make it more expensive for the city, plagued with violent crime and chaos because of failed progressive policies, to borrow in the municipal bond market.
A 2022 report from the city's top economist forecasted that persistently low office occupancy could cause the city to lose $200 million in property tax revenue by 2028.
In June, Barclays analysts told clients, "While we are not overly concerned about San Francisco's credit quality, it will likely experience credit pressure for the foreseeable future, which could negatively affect the city's ratings, as well as the ratings of some of its related credits."
Those analysts said real estate property taxes represent about 60% of the city's local tax revenue, and they warn that revenues won't move much higher through the end of the decade. This might suggest that the deficit explodes from here = higher taxes = more exodus.
Here's our latest reporting on the CRE mess in the metro area:
As long as Democrats are in charge of San Francisco, the metro area is locked in a doom loop that should only worsen.