Moody's Investors Service has downgraded to A2 from A1 the rating on $8.9 million of outstanding general obligation unlimited tax bonds of the Township of Little Falls, N.J.

Little Falls, with a population of 14,400, is about 20 miles west of New York City.

"The downgrade to A2 reflects the township's diminished financial position with very narrow reserves and reliance on cash-flow borrowing," analysts said in a report.

Moody's assigned a negative outlook, citing the township's limited ability to offset potential budget variations given narrow reserve levels and reliance on cash-flow borrowing.

The township's credit rating could be downgraded by Moody's if Little Falls fails to maintain structural balance, increases reliance on cash-flow borrowing, or sees material declines in the tax base.

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