Fresno, California, had its bond rating cut three notches by Standard & Poor’s, which said the state’s fifth most-populous city has almost depleted its reserves amid the economic decline.
The city’s issuer credit rating was lowered to A from AA and to A- from AA- on its lease-revenue bonds, S&P said in statement. The city has $365 million of lease-revenue bonds and $174 million of pension bonds outstanding. The outlook is negative, meaning a further downgrade is possible.
The city’s depleted general-fund reserves leave it vulnerable if tax revenue comes in less than projected, according to the rating company. Fixing the city’s fiscal troubles will require political and collective-bargaining cooperation that may not be achievable in the short term, S&P said.
“Although the city reported that the fiscal 2012 general- fund budget is balanced, persistent structural imbalance has resulted in the city’s significantly weakened financial position, as well as the near-depletion of the city’s emergency reserve, which it used to balance the general-fund budget in prior years and to support deficit spending outside of the general fund,” S&P credit analyst Misty Newland said in the report.
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