CHICAGO — Moody's Investors Service downgraded the issuer credit rating of the metro Detroit suburb of Mount Clemens two notches to A2 from Aa3.
The downgrade comes two weeks before voters will consider a property tax hike to raise money. The city manager said if voters reject the millage proposal, he will ask the state to launch a fiscal review, according to local reports. That's the first step in a possible state takeover.
Mount Clemens is the seat of Macomb County.
The downgrade reflects the city's declining tax base, limited ability to raise revenue and underfunded retirement liabilities, Moody's said.
"The rating also incorporates the city's currently healthy level of financial reserves offset by the prospect of narrowing, above-average debt burden, and long term risks posed by exposure to underfunded defined benefit pension liabilities," analysts wrote in the downgrade report.
The city has a structural deficit in its general fund, according to Moody's.
The ratings agency rates the city's limited-tax general obligation bonds A3, one notch below its issuer rating, reflecting the "lack of a dedicated and unlimited tax levy to repay debt service."
Mount Clemens has $750,000 of LTGO bonds and a total of $23.5 million of debt.
The millage increase vote, which will be on Aug. 5, would generate an additional $1.6 million, the city manager said in local reports.
