NEW YORK - Moody's Investors Service said it has downgraded Riverside County, Calif.’s issuer rating to Aa3 from Aa2 and downgraded to A1 from Aa3 the rating on the county's pension obligation bonds and to A2 from A1 the ratings on its general fund lease obligations.

Moody's assigned an A2 rating to the county's upcoming sale of lease revenue bonds (2012 county administrative center refunding project).Concurrently, Moody's revised the outlook on the county's to stable from negative.

The downgrade of the county's long-term ratings largely reflects ongoing weakening of the county's already narrow financial position. The county has faced substantial challenges as the weak economy cut into its discretionary revenues.

Management has been unable to overcome these challenges, and both operating and structural balance in the general fund remain elusive. The rating continues to reflect the county's very large tax base which has long term advantages, such as low cost real estate, sizable warehousing and distribution facilities, and a nascent alternative energy production sector.

In the nearer term, the effects of the recession are still palpable, including a weak housing market and high unemployment. However, there are some modest signs that the county's recession is abating.

The ratings also incorporate the county's manageable debt portfolio. The stable outlook reflects the combined effects of the modestly improving economy and slowing rate of financial weakening, suggesting that the county's credit position will remain consistent with the current rating over the long term.

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