The city of Massillon, Ohio lost its investment-grade ratings last week when Moody’s Investors Service knocked it down three notches to Ba1 from Baa1.
Massillon is located in Stark County, about 60 miles south of Cleveland, with a population of 32,000. Property values declined 9% in 2013, due mostly to the state’s phasing-out of tangible personal property tax, Moody’s analyst David Strungis wrote in the downgrade report.
“The rating was downgraded because the city is in a much weaker financial position than when it was previously rated,” Strungis said.
Challenges include a negative general fund balance, limited financial flexibility after voters rejected an income tax increase earlier this month, growing long-term liabilities, and possible state declaration of fiscal watch or fiscal emergency given the lack of a plan to correct its problems, Moody’s said.
Moody’s said it is keeping the negative outlook, even at the lower rating.
“The assignment of the negative outlook reflects the expectation that the city’s financial position will remain extremely pressured in the near term and that the city’s ability to return to balanced operations may be impeded by practical barriers to sufficient expenditure reductions and revenue enhancements,” Strungis wrote.