Moody's Investors Service said it has downgraded to A3 from A2 the rating on $32.9 million of the city of University Place, Wash.'s outstanding limited tax general obligation debt.

Concurrently, Moody's has removed the negative outlook.

The A3 rating applies to the city's Series 2005 refunding bonds, series 2007 A, C, and D bonds, and Series 2009 A and B bonds.

The downgrade primarily reflects the city's high general fund debt burden, instability in general fund finances, and a sustained decline in taxable values.

The rating also reflects the city's participation in the broader Puget Sound economy, somewhat high socioeconomic profile and relatively large tax base.

The current rating action also takes into consideration the city's recent delayed debt service payment which was subsequently paid within one business day.

The delay in payment by one day was caused by an administrative error, and not by an impairment of the city's willingness or ability to pay. The delay was not a driver of this rating action, although it is considered a slight credit negative.

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