CHICAGO - Moody's Investors Service downgraded the Cleveland suburb of Maple Heights into junk territory Tuesday, a week after the state auditor declared a fiscal emergency in the city.
Moody's downgraded Maple Heights to Ba2 from Baa3, knocking it from the lowest investment grade rung two notches into speculative grade.
Analysts also put the rating on review for another possible downgrade.
The move affects $14.4 million of bonds.
It's the third time Moody's has downgraded the city in roughly two years. The rating has fallen six notches since March 2013, from A2.
Moody's said the latest downgrade reflects the city's continued financial deterioration and its January default on three sewer loans from the state. The city made the payments, to the Ohio Water Development Authority, roughly 45 days late, officials said.
"Additionally, the rating incorporates the city's weak economic, tax base and demographic fundamentals which have continued to decline since the recession; extremely narrow liquidity and reserves across all governmental funds; average debt burden and above average exposure to unfunded pension liabilities based on participation in two statewide cost-sharing plans," Moody's said in the downgrade report.
In keeping the rating on review for another possible downgrade, Moody's said it would seek the city's latest financial information and review the financial recovery plan that will be crafted with the state as part of the financial emergency process.
State Auditor David Yost declared the emergency on Feb. 13 after the city tripped two of the state's six triggers. Maple Heights had been under fiscal watch since April 2014. The declaration means a commission will take over the city and develop the recovery plan within 120 days.
Located in Cuyahoga County, Maple Heights is about 10 miles south of Cleveland with a population of 23,000. It has $3.5 million of outstanding sewer loans from the development authority in addition to the $14.4 million of outstanding GO bonds issued in 2004 and 2010 and roughly $4.3 million of loans from the Ohio Public Works Commission.