Fitch Ratings said in a credit report Monday that it has downgraded $188 million of Tacoma, Wash., limited-tax general obligation bonds to A from AA-minus.
The credit rating agency also cut its rating on $23.5 million of the city’s unlimited-tax general obligation bonds to A-plus from AA, and kept $28 million of convention center and parking revenue bonds at A-plus.
Fitch also assigned the outlook on all of the bonds to negative.
“The downgrade reflects the city’s limited progress in addressing a structural deficit in its general fund resulting in a sharp decline in reserves projected to reach a low 3% of spending in fiscal 2012,” the report said.
Tacoma’s deficit for its fiscal 2012 to 2013 two-year budget is estimated at as high as $65 million, or 15%, of general fund spending, despite nearly $20
million of cuts during the previous
biennium, according to Fitch’s analysis.
Tacoma’s general fund has experienced four consecutive years of operating deficits.
Fitch said the financial troubles raise concerns about the city’s ability to manage its finances.
The rating agency said it could downgrade the city’s bonds further if its in unable to fix ongoing financial problems in its next two-year budget or if its audited financial report shows deeper problems.