Moody's Investors Service downgraded the city of Hayfield, Minn.'s general obligation rating three notches to the lowest investment-grade level.
Moody's lowered the rating to Baa3 from A3 on $4.2 million of debt. The review came ahead of the city's issuance of $1.1 million of GO-backed wastewater revenue bonds, which carry an enhanced rating through a state program of Aa2 with a negative outlook, and a GO refunding issue for $515,000.
The downgrade "reflects the city's very limited tax base that experienced a significant decline in 2012 valuations due to state's adjustment to taxable valuations," Moody's said. The rating further takes into account sound general fund operations, limited overall liquidity, significant enterprise risk arising from pressured water and sewer operations and narrow operations of a city owned nursing home, and plans for additional debt.