Moody’s Investors Service has downgraded Allentown’s underlying general obligation rating to A2 from A1, affecting $100 million of parity-related debt. The outlook remains negative.

The agency also assigned an A2 underlying rating to $13.65 million of Series 2011A GO bonds. Moody’s cited three straight operating deficits, largely driven by aggressive budgeting of city revenues and reserve appropriations to balance the budget in 2008 and 2009.

“The A2 rating incorporates a sizeable and mature urban tax base with below-average socioeconomic indices and a slightly above-average, but manageable, debt burden with below-average payout,” Moody’s said.

Over the near term, Moody’s said it will monitor the city’s ability to stabilize its narrow financial position and to begin to replenish reserves. “Absent these changes, the city’s creditworthiness will be pressured,” Moody’s said.

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