Moody's Investors Service on Tuesday dropped Long Beach, N.Y.'s general obligation rating five notches to Baa3 from A1, and placed the rating on review for a possible further downgrade.

The move affects $48.3 million of GO debt. The bonds are secured by the unlimited GO pledge of the city.

The downgrade "reflects the city's deteriorating financial position since 2008 marked by a lack of structural balance due to declining mortgage tax revenue and increasing expenditures," according to the agency.

Moody's said the rating also factors in the city's sizable tax base with above-average wealth levels and a manageable debt burden.

Placing the rating under review reflects the projected deficit fund balance in fiscal 2012 and "a deteriorating cash position resulting in near-term liquidity strain," analysts said. The city recently issued tax anticipation notes and budget notes to meet the December payroll.

Messages seeking comment were left with city manager Charles Theofan.

Long Beach is part of Nassau County and adjacent to New York City's Queens borough off the south shore of Long Island.

Projections show Long Beach's cash balance is expected to decline further and may require additional cash-flow borrowings in the near term, which will require market access, Moody's said.

The agency is also reviewing the Long Beach rating for withdrawal due to insufficient information given severe negative discrepancies between the city's projections in August 2011 of reserve and cash positions and unaudited reporting of its fiscal 2011 results earlier this month.

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