Moody’s Investors Service last week placed $699 million of New Orleans’ municipal debt on review for possible downgrades due to “deteriorated financial performance.”
The move affects $529 million of outstanding A3-rated general-obligation bonds, $25 million of Baa1 limited-tax GO bonds from 2005, and $117 million of Baa3 pension obligation bonds from 2005.
Moody’s also put on review the tax-backed debt issued by various New Orleans agencies, including $20.2 million of A3-rated Sewerage and Water Board drainage bonds and $6 million of A3-rated Downtown Development District bonds.
“The review reflects the city’s deteriorated financial performance, as evidenced by audited fiscal 2010 results significantly below expectation, as well as the financial, economic and governance linkages amongst the various securities despite their respective legal pledges,” Moody’s said in the report.
New Orleans officials will ask the Louisiana State Bond Commission next week for permission to refinance $75 million of 1998 certificates of obligation in order to avoid $15.5 million of debt service in 2012.
Andy Kopplin, an aide to Mayor Mitch Landrieu, told the City Council’s budget committee in August that the city spent $90 million more than it collected in 2008 and 2009.
The city ended 2010 with a deficit of $28.6 million, he said.
Standard & Poor’s rates the city’s GO debt BBB and the limited-tax GO debt BBB-minus.
The Sewerage and Water Board’s drainage bonds are rated BBB-minus by Fitch Ratings.