Fitch Ratings said it has downgraded Manchester, N.H.'s $122.5 million general obligation bonds to AA from AA-plus and $58.8 million school facilities revenue bonds to AA-minus from AA.
The rating outlook is stable.
The GOs are backed by the city's full faith and credit and unlimited taxing power.
The school facilities revenue bonds are special obligations of the city, payable from appropriations made by the city pursuant to a financing agreement which is not subject to termination for cause by either party.
Fitch believes the city's financial position is subject to some unpredictability, as indicated most recently by a notable unbudgeted deficit in fiscal 2014. This is the third such unplanned deficit since fiscal 2008.
Importantly, the city voted to exceed its tax cap for fiscal 2015 to address the aforementioned budget deficit, but other challenges remain including rising pension costs, and the tax cap will likely challenge the city's ability to rebuild reserves going forward.
Key debt metrics should remain manageable based on modest future issuance plans.
The combined Fitch-adjusted funded status of the city's pension plans approximates a low 61%, and expected higher contributions would erode budgetary flexibility.
Manchester serves as the anchor for a variety of economic activities in the northern New England area. Unemployment remains well below the national average.
The ratings are sensitive to the city's ability to stabilize financial operations and strengthen reserves, as the current fund balance position offers a modest cushion to address unforeseen spending needs and budgetary challenges going forward.
Manchester is located in Hillsborough County, N.H., approximately 60 miles north of Boston. The city is bisected by the Merrimack River, and Interstates 93 and 293 intersect within the city. The city is the largest in northern New England with an estimated 2013 population of 110,378, showing slight growth of 3.2% since the 2000 census.
