Moody’s Investors Service announced that it has downgraded the Los Angeles County Metropolitan Transportation Authority’s $1.2 billion of Proposition C sales tax revenue bonds to Aa3 from Aa2 and $166 million of general revenue bonds to A1 from Aa3.

The downgrade of the bonds reflects the weaker leverage constraint of 1.30 times on the Proposition C lien compared to an effective additional bonds test of 2.46 times for Proposition A bonds and 2.50 times for Measure R bonds.

The 1.30 times ABT is relatively weak compared to other highly rated mass transit sales tax bonds.

Also included in the rating consideration was the cumulative 18% decline in pledged revenues between fiscal years 2008 and 2010.

The stable outlook reflects Moody’s analyts expectations of continuation of recovery in retail sales within Los Angeles County.

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Corrected July 25, 2011 at 10:47AM: Correcting the changed rating on the Proposition C bonds