Moody's Investors Service said it has downgraded to A3 from Aa3 the rating on the city of North Mankato, Minn.'s outstanding general obligation debt.

The A3 rating applies to $15 million in outstanding general obligation Moody's rated debt.

Additionally, the A3 rating is under review for possible further downgrade, pending receipt of results from fiscal 2012, which ended on December 31st.

The city's $15 million in outstanding general obligation debt is secured by its general obligation tax pledge which benefits from a dedicated levy unlimited as to rate or amount.

The downgrade reflects a declining tax base; rapidly declining cash reserves which are expected to continue to deteriorate; underperforming special assessment revenues which have required loans from both the general fund and enterprise funds for debt service; very high debt service expenditures as a percent of operations; and revenue and expenditure stresses which have pressured general operations.

The assigned A3 rating has been placed under review for possible further downgrade, pending receipt of results from fiscal 2012, which ended on December 31st.

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