English: City of Allentown from east side (Photo credit: Wikipedia)
Allentown‘s bond rating has been downgraded from A2 to A3 with a negative outlook, Moody’s Investors Service announced this week.
According to Moody’s, the new rating reflects the city’s approximately $120.3 million debt as well as “four consecutive operating deficits which have largely been driven by aggressive budgeting of city revenues and reserve appropriations to balance the budget.”
Investors use credit ratings such as Moody’s to determine the risk of a municipality’s defaulting on debt payments. A lower rating can force municipalities to pay higher interest rates to compensate for the risk, increasing the cost of borrowing.
Allentown’s weak socioeconomic profile — a sizable and mature urban tax base with below-average “socioeconomic indices” — and limited financial flexibility are challenges to the city, according to Moody’s.
Read more: http://www.mcall.com/news/local/allentown/mc-allentown-pa-bond-rating-downgrade-moodys-20121012,0,5203322.story