NEW YORK - Moody's Investors Service said it has downgraded the rating on the city of Lee's Summit, Mo.'s outstanding GOULT debt.

Concurrently, Moody's has downgraded to Aa3 from Aa2 the rating on the city's outstanding certificates of participation. Additionally, the stable outlook previously associated with the city has been removed. The Aa1 and Aa3 ratings apply to $27.4 million of outstanding general obligation unlimited tax debt and $12.3 million of outstanding certificates of participation, respectively.

The outstanding bonds are secured by the city's general obligation unlimited tax pledge. The downgrade of the city's rating to Aa1 reflects the sizable impact of a recently expensed tort liability which resulted in significantly lower, but still adequate General Fund reserves, which are not expected to recover to previous levels in the near to medium term.

Also taken into account is the city's large and diverse tax base, which is favorably located in the Kansas City (GOULT rated Aa2/stable outlook) metropolitan region; varied, but economically sensitive revenue streams; above average socioeconomic characteristics; and manageable debt levels with rapid principal payout. The downgrade of the city's certificates of participation reflects the city's general obligation credit characteristics, the annual risk of non-appropriation, and the non-essential nature of the projects financed with debt proceeds.

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