Annapolis' credit rating may be downgraded

Moody's puts city on 'watchlist'

December 29, 2010|By Nicole Fuller, The Baltimore Sun

A prominent credit-rating firm has placed Annapolis on notice that the city's rating might soon be downgraded.

Annapolis Mayor Joshua J. Cohen announced Wednesday that Moody's Investors Service has placed the city on a watchlist for a possible downgrade of its credit rating of general obligation bonds. The downgrade would affect about $79.3 million in debt, said city officials, citing Moody's. The city's credit rating is currently Aa1 — the second-highest rating in Moody's rating system.

"The watchlist designation comes as no surprise," Cohen said in a statement. "Given the city's recent financial challenges, which are shared by municipalities across the country, some bumps in the road are to be expected. But taking the long view, I am fully confident that we are on the right track to navigate the city out of these rough financial waters. Just as we made the difficult but necessary decisions to balance the budget, we will continue to take the necessary actions to put the city on solid financial footing."

According to city officials, the watchlist action is based on a weakened general fund and a negative undesignated fund balance. Moody's will reconsider the watchlist action after receiving recent operating information, including audited fiscal 2010 results and a new capital improvement plan from the city and make a decision to downgrade the city's rating or withdraw it from the watchlist in the next 60 days, said city officials.

"Moody's is taking into consideration the fact that the city's new management team has implemented measures to correct the city's internal accounting procedures and financial management," said finance director Bruce Miller. "However, it is important to note that other rating agencies may take similar actions and the city will be ready to work toward maintaining its current ratings with all three agencies."

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