Fitch Ratings cut its outlook on San Francisco’s debt to negative from stable Wednesday, citing sizeable budget deficits and low reserves. The rating on the city’s $1.2 billion of outstanding general obligation bond remains AA-minus. Fitch rates the bulk of the city’s $1.2 billion of appropriation-backed bonds one notch lower, at A-plus.

“The outlook revision to negative from stable reflects San Francisco’s sizable future years’ projected budget gaps and projected low reserves by the end of fiscal 2010,” analysts Karen Ribble, Alan Gibson and Amy Doppelt said in a report. “The reduced financial flexibility results in part from the city’s reliance on one-time solutions to its structural imbalance.”

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