NEW YORK - Moody's Investors Service said it has downgraded the city of Brownwood, Texas's general obligation rating to Baa1 from A3 and assigned a Baa1 rating to the city's issuance of $10,750,000 combination tax and revenue certificates of obligation, Series 2012.

The Baa1 rating affects $19.2 million of Moody's rated debt, inclusive of the current offering.

The certificates are secured by the levy and collection of a direct and continuing ad valorem tax levied against taxable property located in the city within the limits prescribed by law and are further secured by a limited pledge of surplus net revenues of the city's waterworks and sewer system.

Moody's has previously considered the general fund's narrow cash position and negative fund balance and incorporated this into the rating.

The downgrade reflects further leveraging of the water and sewer system which is of special concern given the system's support of general fund operations. The Baa1 rating also reflects the city's relatively stable tax base which demonstrates a weak socio demographic profile.

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