The city of Baltimore is absorbing a negative credit rating outlook revision courtesy of Moody's Ratings due to the port city's struggles in maintaining utility fee supported fund balances as compared to its peers.
"The revision of the negative outlook at the issuer level reflects the city's recent trend of declining fund balance levels driven largely due to weakening financial performance in its water and sewer funds," said Moody's.
The revision was announced on Tuesday and effects the outlook for the city's issuer rating, general obligation, and highway use revenue bonds that were all revised to negative from stable. Moody's affirmed the city's issuer rating at Aa2.
The Aa2 rating is also affirmed for the city's proposed $66.7 million tax-exempt Consolidated Public Improvement Bonds, Series 2025A and the taxable $34 million Consolidated Public Improvement Bonds, Series 2025B.
The list of affirmations includes Aa2 for Baltimore's general obligation (GO) bonds and highway user revenue special tax bonds.
Tax increment financing bonds were affirmed at Baa2, and parking revenue bonds are affirmed at A1.
According to Moody's, the city had about $4.7 billion in outstanding bonds at the end of 2024. The outlook on the city's parking revenue and TIF bonds remain stable.
"The General Fund has held generally steady however it is expecting a decline in 2025 due to public safety salary and overtime spending," said Moody's.
"While the city has worked to improve finances in the water and sewer funds, largely through very large 2025 mid-year rate increases, the overall trend in fund balance is out of line with its peers."
In April the city approved more than $74 million for seven Baltimore City water infrastructure projects by tapping low-interest loans and loan principal forgiveness from the Water Quality State Revolving Fund and the Drinking Water State Revolving Fund.
"The City of Baltimore will be stronger with these critical investments in water infrastructure," said Maryland Department of the Environment Secretary Serena McIlwain.
"This funding reflects our ongoing commitment to modernizing our water infrastructure to protect the health of residents, create jobs and support local businesses. This is about our children, our economy and our waterways."
In April S&P Global Ratings affirmed its A+ rating on the Baltimore Mayor and City Council's, outstanding senior-lien water bonds and affirmed its 'A' rating on the city's outstanding subordinate-lien water bonds with a stable outlook.
Moody's previously downgraded the state's issuer rating and general obligation bonds to Aa1 from Aaa in May.
Despite the downgrade the state executed a successful $1.6 billion bond sale on June 12, at a true interest cost of 3.55% and premiums of more than $125 million, according to a statement from the Maryland Treasurer's Office.
The Port of Baltimore which supports over 15,000 direct jobs and nearly 140,000 indirect jobs while generating more than $395 million in taxes took a catastrophic hit in March 2024.
The container ship Dali crashed into the state-tolled Francis Scott Key bridge which temporarily closed the harbor.
Demolition of the existing structures, a key element of the rebuilding efforts are scheduled to start this week.
The Port had its second-best year in shipping volume in 2024 by handling 45.9 million tons of cargo. In 2023, the port moved 52.3 million tons.
Baltimore's Finance Director and Budget Director could not be reached for comment.
