Moody's Ratings downgraded New Orleans' issuer, general obligation unlimited tax and general obligation limited tax ratings to A3 from A2 Wednesday, citing a drawdown of reserves.
Simultaneously, it revised the outlook on the ratings to negative from stable.
The downgrade is "driven by the significant, unbudgeted use of reserves in support of operations and one-time events in recent years that has materially narrowed the city's financial position," Moody's said. "Available fund balance and liquidity declined to -2% and 41.5% respectively in fiscal 2024, a material and unexpected shift from 6.1% and 56.9% in 2023." The city's fiscal year coincides with calendar years.
"While additional restricted reserves are available and increase fund balance to 7.9% of revenue, management reports further declines in the city's financial position thus far in fiscal 2025 driven by revenue declines and increased expenses due in part to unplanned, one-time events," Moody's said. Preliminary fiscal 2026 forecasts indicate further revenue decreases.
Economic growth in the city has lagged national gross domestic product growth, Moody's said. Resident income is at 77% of the national average.
"Governance is a key driver of this rating action, reflecting budget management practices that have led to escalating reliance on reserves beyond planned levels and ongoing narrowing of the city's financial position," Moody's said.
For positives, Moody's noted the city's strong tourism activity and presence of prominent higher education and healthcare providers.
New Orleans is rated A-plus with a stable outlook by S&P Global Ratings and A with a negative outlook by Fitch Ratings.
The government of New Orleans didn't respond to a request for a comment.
The downgrade of New Orleans comes as Louisiana
Louisiana
