Standard & Poor's Ratings Services lowered its issuer credit rating (ICR) to 'BBB' from 'A' on Fresno, Calif. and its long-term rating and underlying rating (SPUR) to 'BBB-' from 'A-' on the city's lease revenue bonds. The outlook is negative.

"The lowered ratings reflect our view of persistent general fund imbalances despite recent workforce reductions and modest revenue improvement starting in fiscal 2011," said Standard & Poor's credit analyst Misty Newland. "The city's budget flexibility has become increasingly narrow given the level of previously enacted workforce reductions, closed public safety contracts, low general fund balances, and weak general fund liquidity, in our view," continued Ms. Newland.

The ratings reflect our view of the city's:

• Role as a regional economic center;
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• Positive general fund results estimated for fiscal 2012;
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• Moderate debt burden, with no plans to issue additional debt; and
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• Property tax override to support pension costs.
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The negative outlook reflects our view of current budgetary constraints that may limit the city's ability to cure projected multiyear general fund deficits absent strong revenue growth, which we consider unlikely given current indications that the city will continue to experience a slow economic recovery.

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