Fitch Ratings assigned top F1-plus short-term marks to Milwaukee's sale yesterday of $228 million of school revenue anticipation notes for the Milwaukee Public Schools, but revised its outlook on the city's AA-plus general obligation credit to negative from stable.

The city has $849 million of outstanding GO debt. The notes mature on June 30. The top short-term rating reflects the strength, stability, and predictability of revenue that is used to repay the notes.

The district pledges its state aid payments and all other revenue in school operations to repayment and surplus revenue in the city's debt service fund to interest payments. The borrowing represents 15% of the estimated revenue that the district expects to collect in the current fiscal year.

Fitch attributed its change in outlook on the city's credit to its economic struggles in the current recession and a weakening of its financial position that together are "creating a more challenging fiscal picture going forward."

Unemployment rose to 12.3% in June from 6.6% a year earlier and the city expects that final figures will show a tax base loss of 5% in 2009 after a period of strong growth. The city has taken steps to slow expenditure growth, but has dipped into reserves over the past two years to balance its budget.

Moody's Investors Service rates the city's GOs Aa2 with a negative outlook and Standard & Poor's rates the city AA.

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