Moody's Investors Service said it has downgraded to A2 from A1 the rating on the city of Hartford, Conn.'s outstanding general obligation bonds, affecting approximately $352 million of outstanding debt.
The outlook is negative.
Concurrently, Moody's has assigned an A2 rating to the city's $82 million of general obligation bonds, Series 2014 B. Moody's has also assigned a MIG 2 rating to $50 million general obligation bond anticipation notes (BANs), dated October 28, 2014 and due October 27, 2015.
The bonds are secured by the city's general obligation unlimited tax pledge. Proceeds from the bonds and notes will be used to finance various city and school capital projects.
The downgrade to A2 incorporates the weakened financial position, characterized by narrow reserve levels that are expected to decline further following a sizeable anticipated deficit in fiscal 2014.
The downgrade also factors the expectation that the city will remain challenged to restore fiscal stability in the near term due to an ongoing reliance on one-time revenue sources for operations, limited revenue raising ability, and diminished flexibility for future expenditure reductions. The rating also incorporates the sizeable liabilities for pension, OPEB, and debt, as well as the city's standing as the state capital and an important regional economic center.
The negative outlook reflects the possibility for downward rating action should the city fail to stabilize and augment its slim reserve levels over the near term.
The MIG 2 rating is based on the city's long-term credit quality, as reflected in the rating and outlook. As per Moody's BAN methodology, note ratings are capped at MIG 2 for issuers rated A2 with a negative outlook and below.
