Moody's Investors Service downgraded Atlantic City, N.J.'s general obligation and city-guaranteed debt to Baa2 from Baa1 Nov. 20, affecting $219 million in debt.

Moody's retained a negative outlook on debt.

Increasing competition for Atlantic City's casinos from neighboring state casinos is at the heart of the downgrade, said Moody's analyst Vito Galluccio and vice president Julie Beglin. Due to this competition, the casinos have seen revenue declines and have filed large tax appeals with the city.

The downgrade is also due to the city's narrow financial cushion, weak residential socioeconomics, and increasing debt. It also is connected to the fact that the city's substantial tax base is dominated by the casino industry (70% of assessed values).

The negative outlook is because Moody's expects that declining casino revenues and ongoing tax appeals will continue to reduce the city's taxable base.

For strengths, Galluccio and Beglin note the city's large tax base and ongoing commercial developments and renovations.

In late October Moody's said that a court decision that awarded the equivalent of 20% of Atlantic City's annual revenues to the Borgata Casino was a credit negative for the city.

The city has said that it will appeal the decision.

Atlantic City officials did not immediately respond to a request for comment for this story.

On Tuesday Standard & Poor's affirmed its A-minus rating on Atlantic City's GO debt.

S&P credit analyst Lindsay Wilhelm pointed to the city's very weak economy, weak budgetary flexibility, strong budgetary performance in fiscal 2012, very strong liquidity position, adequate management conditions, and weak debt and contingent liability position. S&P has a stable outlook on the rating.

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