NEW YORK - Moody's Investors Service said it has downgraded to A1 from Aa3 the city of Kent, Wash.'s limited tax general obligation bond rating. Concurrently, Moody's has assigned a negative outlook to the rating.
The downgrade reflects the city's significantly deteriorated financial position, resulting from recurring operating deficits and a depletion of cash and reserve levels across all governmental funds. The downgrade also incorporates the city's increased debt burden and risk associated with contingent support for a distressed component unit.
The A1 rating also reflects the city's large tax base, stable local economy, location within the Seattle metropolitan area and manageable debt burden.
The negative outlook reflects the city's very limited financial flexibility deriving from a weak balance sheet with a high fixed cost burden; the need to divert a substantial portion of future cash flows from general fund uses to resolve deficits and internal debts throughout governmental funds; and uncertainty regarding the city's ability to implement additional expenditure cuts, preserve current levels of state shared revenues and stabilize governmental operations through structural, ongoing reforms rather than through one-time solutions.
