The City of Fresno's precarious financial position is leading to more repercussions in the investment community. On Friday, the firm Standard & Poor's downgraded the city's credit rating from "A" to "BBB." Last month, the two other major credit ratings agencies, Fitch and Moody's issued similar downgrades.
The rating of "BBB" is Standard & Poor's next to lowest "investment grade" rating. The firm also gave Fresno's financial outlook a "negative" rating, meaning future downgrades are possible.
Standard & Poor's credit analyst Misty Newland said in a press release that it may be difficult for the city to close projected budget deficits without strong revenue growth, which is unlikely.
"The lowered ratings reflect our view of persistent general fund imbalances despite recent workforce reductions and modest revenue improvement starting in fiscal 2011. 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."
Standard & Poor's did have some good news for Fresno however, citing the city's "moderate" debt burden, and a property tax "override" that helps fund the city's pension system, which is generally regarded as one of the better funded in the state.