(May 3, 2005, updated) -- Senior city management says credit rating agencies have had LB City Hall on a "negative outlook" for the past three years, a credit downgrade is still possible...and credit rating agencies told city management last year that it's not typical for them not to take action in such circumstances.

During a May 3 City Council Budget Workshop, city management budget chief Mike Killebrew previewed next week's release of City Hall's midyear budget performance report by referring to a "negative watch"...but after we reported this, Mr. Killebrew contacted us to correct a misspeak.

"It's not a 'negative watch,' it's a 'negative outlook,' Mr. Killebrew said...noting that a "negative watch" is usually accompanied by a credit downgrade...which hasn't happened in LB's case.

At the afternoon Budget Workshop, Mr. Killebrew told the Council:

"A credit downgrade is still possible. We spent quite a bit of time this past summer with the credit rating agencies, speaking to the updated Three Year Plan, speaking to the FY 05 budget that the Council was at the time debating, and they told us in no uncertain terms that we've been on a negative watch [misspeak, should be outlook] for three years and that it is not typical for them not to take action. So it's our feeling that as long as we're still showing great progress toward eliminating our structural deficit that they would hopefully still look favorably on us, but we do have some work to do here."

Mr. Killebrew's statement came after urging Councilmembers not to extend city management's Three Year Financial Plan into a lengthier plan to balance the budget. "Extending the plan to any great extent is going to be extremely difficult. The one-time resources that have been relied on in prior years, including related funds, they've been tapped. There are still some, and even in the endorsed and updated Three Year Plan, we had anticipated possibly having to use a little bit, but we're getting down to the nub on where we can go for one-time resources," he said.

Mr. Killebrew noted that the Council had endorsed an "updated" Three Year Plan in Sept. 04 which requires finding $30 million of solutions to get the budget fully balanced...and in the current (FY 05) budget, $3 million of $5 million in savings from employee wages/work practices and benefits remain to be found, plus $1.5 million in savings or revenue in fire services study...but "we do expect to be successful in achieving these structural savings."

Mr. Killebew also forewarned that the FY 06 budget now being prepared by city management assumes savings from closing LB's main branch on Mondays...and voter approval to increase LB's hotel room (transient occupancy) tax.

Mr. Killebrew said LB's current (FY 05) city budget is performing at or above projections last year (about 1% above, amounting to roughly $3-4 million)...but the high performance of some funds is being offset by the underperformance of others.