Fresno, California, had its ratings on $462 million of debt lowered one step by Moody's Investors Service because of deteriorating finances.
The city's long-term issuer rating was cut to A3, the fourth-lowest investment grade, from A2. Its pension obligation bonds were downgraded to Baa1, third-lowest, from A2 and its lease-revenue bonds fell to Baa2, one step lower, from Baa1, the New York-based rating company said yesterday in a statement. The outlook for the ratings is negative, meaning another downgrade is possible.
Fresno, a city of 510,000 about 200 miles (320 kilometers) north of Los Angeles, may be the latest California city to buckle under the weight of employee costs and eroding tax revenue in the wake of the recession. Stockton, San Bernardino and Mammoth Lakes have taken steps toward bankruptcy in the last month.
"The downgrade reflects the city's exceedingly weak financial position and uncertainties embedded in the city's adopted budget, most notably $12 million of budget-gap closing solutions," Moody's said in the statement. "These solutions continue to rely on labor concessions, which have proven to be difficult to achieve."
Fresno, in the agricultural San Joaquin Valley, is the largest inland city in California and the 34th largest in the U.S.