BRADENTON, Fla. — Just ahead of a planned sale of up to $775 million of general obligation bonds, Moody’s Investors Service has placed the Aa1 rating of Nashville’s consolidated government on watch for possible downgrade, citing the devastating recent floods and tornadoes, among other reasons.

Moody’s negative watch applies to the Metropolitan Government of Nashville and Davidson County’s $1.87 billion of outstanding parity debt. It is based on an already narrow financial position marked by low general fund reserves and potentially significant tax base damage due to the flooding that could further stress the city’s finances, the agency said.

“We will continue working with Moody’s to fully discuss the ultimate impact to the Metropolitan Government and how we will meet those obligations,” said Nashville’s finance director, Rich Riebeling.

Moody’s raised Nashville’s GO rating to Aa1 from Aa2 last month during its massive recalibration of ratings to a global scale. The agency has had a longer-term negative outlook on the bonds since February 2008.

The Metro council has authorized the sale of up to $775 million of GOs, a portion of which will restructure outstanding debt for budget relief in the next two fiscal years. Proceeds also will take out commercial paper and provide new money for various projects. Approximately $252 million is expected to be sold as taxable Build America Bonds. Moody’s assigned a Aa1 rating to the bonds.

Goldman, Sachs & Co. will be the book-runner. First Southwest Co. is Metro’s financial adviser. Riebeling said the bonds are expected to price the week of May 30.

Recent estimates of damages to private property in and around Nashville have reached nearly $2 billion from the floods and tornadoes earlier this month. Many commercial businesses also experienced damages, including Gaylord Entertainment’s facilities, which include the historic Grand Ole Opry and hotel that could be closed up to six months.

Nashville has estimated damages to government buildings at approximately $20 million and $2 million to schools, according to Moody’s. Debris removal and damage to bridges and roads is estimated to be another $25 million. Much of the cost is expected to be covered by flood insurance, Federal Emergency Management Agency reimbursements, and Tennessee.

Moody’s said its negative outlook reflects its belief that Metro could have difficulty maintaining current reserve levels and adequate liquidity given voter-imposed constraints on raising taxes, annual subsidies to Metro General Hospital, and potential support of a new convention center, which is under construction.

The Metropolitan Government of Nashville and Davidson County Convention Center Authority last month sold $623.2 million of revenue bonds backed by several tourist-related taxes. Some $419.1 million of subordinate bonds in that offering are backed by non-tax revenue from Nashville’s general fund. Bond proceeds are being used to build a 1.2-million-square-foot convention center in downtown Nashville to replace a smaller facility.

Moody’s also put Metro’s $372.49 million of Water and Sewer Enterprise debt on negative watch because of damage to utility facilities from the floods. The agency also placed the Aa2 rating on $67 million of District Energy System revenue bonds on negative watch because the bonds are secured by the net revenues of the system but tied to a pledge of payments from Metro that are subject to annual appropriation.

On Tuesday, Standard & Poor’s said it did not anticipate immediate changes in the ratings for Nashville and 15 other Tennessee cities and counties affected by the floods. Standard & Poor’s rates Nashville’s GOs AA with a stable outlook.

Back on April 6, Fitch Ratings downgraded Nashville GOs to AA-minus because of the potential strain of the convention center. On April 30, with its ratings recalibration, the agency raised the rating to AA with a stable outlook.

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