Moody’s Investors Service downgraded Bridgeport, Conn.’s general obligation rating to A2 from A1 Monday and revised the outlook to negative from stable. The downgrade affects $657 million in outstanding debt.
Moody’s action stems from the city’s very narrow financial position following a reserve draw in fiscal 2012, wrote Moody’s analyst Thomas Compton and managing director Naomi Richman. The action is also due to pressure from long-term liabilities and a deficit in the city’s Internal Service Fund.
The city’s ability to augment its fund balance levels, address the internal service fund deficit, and continue to fund its required contributions for pension and OPEB will bey key rating considerations in future reviews, Moody’s wrote.
In assigning the rating, Moody’s also considered the city’s sizeable tax base, below average socioeconomic indices and highly leveraged status.
Responding to Moody’s downgrade, Bridgeport mayor Bill Finch noted that Moody’s commended the city for its tax base and a history of implementing expenditure cuts to address revenue weaknesses.
“Every city, county and state must look at the escalating costs of retiree pensions and benefits,” Finch said. “It is a dilemma that we all face. Local, state and county governments have made a promise to employees about their retirement benefits and employees should have a reasonable expectation to receive these benefits when they retire. The problem is our populations can no longer afford the price of these benefits, particularly not after the largest economic decline in decades. We need a national response in order to resolve this issue.”
