NEW YORK - Moody's Investors Service said it has downgraded to A3 from Aa3 the rating on Richmond Heights, Ohio's general obligation debt.
The city has $1.9 million in general obligation unlimited tax debt and $7.5 million in general obligation limited tax debt. Concurrently, the rating has been placed under review for downgrade or withdrawal.
The downgrade to the A3 rating reflects deterioration of the city's financial reserves with deficit cash balances at the end of fiscal 2008 and reported modest improvements in fiscal years 2009 through 2011, bringing cash levels to a reportedly positive, though narrow position.
The rating additionally incorporates the city's modestly-sized tax base in the Cleveland (A1/stable outlook) metropolitan area and average debt burden.
The lack of a rating distinction between the general obligation unlimited and limited tax debt reflects the state requirement that Ohio (GO rated Aa1 with stable outlook) cities use all revenues, including available property tax millage under the ten mill limitation statutory code, for the payment of debt service prior to any other uses.
The city's last audit was in fiscal 2008, and the city has not completed financial statements for fiscal years 2009 and 2010.
Consequently, Moody's has limited information regarding the city's financial operations since fiscal 2008.
The ongoing review for further downgrade is prompted by Moody's belief that the city may have had further weakening of financial operations during this time period than have been reported.
Moody's is also reviewing the rating for withdrawal due to a lack of sufficient information.
If Moody's is unable to obtain sufficient information regarding the city's current financial position within the coming months, Moody's said it will take appropriate rating action which could include the withdrawal of the rating.
