CINCINNATI (TDB) -- City Manager Milton Dohoney says of the downgrade: "As a result of this revised outlook, it is imperative that the City focus on promoting economic expansion, maintaining a structurally balanced budget, restoring reserve funds and improving funding trends for the pension fund. These factors must be achieved in order to improve the outlook rating and maintain the current favorable bond ratings." He did not pull any punches. The credit-rating agency says the city's bonds remained rated Aa1 -- which means they are susceptible to very low risk but are not quite top-shelf at Aaa. Moody's downgrade of the outlook to negative means storm warnings have now been posted for traders and investors. Cities issue bonds to finance everything from street construction to parking lots. The rating determine how much it will cost of borrow money. Wikipedia offers a primer on how the bond ratings work and what they actually mean.
Dohoney told city officials in a memo that ratings for the city's revenue bonds and the Convention Facilities Authority of Hamilton County were affirmed, but also had the outlook cut to negative. Dohoney wrote: "The change in outlook reflects the challenges of the current economic cycle that has affected the city's Income Tax collections and the negative pressure caused by general economic conditions." From the Moody's report: "The magnitude of the economic challenges is demonstrated by the city's use of its rainy day fund to balance the FY2010 budget, which is atypical of the city's financial practices. Favorably, the use is modest and does not violate city policy to maintain the fund between 5% and 8% of the General Fund budget."