Standard & Poor's Ratings Services said it lowered its underlying rating one notch to BBB from BBB-plus on Fulton, N.Y.'s general obligation debt.
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The outlook is negative.
"The rating action reflects our view of the city's ongoing structural imbalance that is likely to persist given limited budgetary flexibility, an eroding tax base, and a lack of substantial changes to financial operations necessary to rectify the imbalance," said Standard & Poor's credit analyst Randy Layman.
The negative outlook reflects S&P's view that Fulton's financial position will continue to deteriorate based on the obdurate status of negotiations with its unions and its curtailed revenue raising capacity.
