"Every city in the state is looking on with some concern," said Dave Vossbrink, spokesman for the city of San Jose. "Governments of all kinds borrow money, usually to build infrastructure that lasts a long time. It's like getting a mortgage to build roads, a sewage plant, whatever it might be."
San Jose has shuttered libraries and laid off police officers to cut costs, and residents voted this summer to cut the pension benefits for city workers. But while the city is taking steps to reassure investors of its fiscal health, there is frustratingly little it can do to control larger fears about the municipal bond market.
"We know that even though we have a good reputation for our own affairs, if you are in a marketplace where some of your counterparts may be in a less desirable position, then it could have some bearing," Vossbrink said.
Moody's said it will review all California cities in the coming weeks and conduct in-depth reviews of stressed cities in September, with reports issued as the reviews are completed.
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