Moody's Investors Service on Friday lowered its rating on Newburgh, N.Y.'s general obligation bonds to Ba, a below-investment grade rating, from Bal.
In lowering the rating, Moody's cited a planned deficit bond sale this week and troubled finances.
About $3.9 million of oustanding unenhanced GO debt is affected.
An additional $3.6 million of outstanding GO debt is Aaa-rated and enhanced by three bond insurers: Municipal Bond Investors Assurance Corp., Financial Guaranty Insurance Co., and AMBAC Indemnity Corp., according to Moody's.
The city's "poor financial performance, exacerbated by the recession, and poor socio-economic conditions" all contributed to the downgrade, said Dennis E. Porcaro Jr., a Moody's assistant vice president.
The action hits the city as it prepares to sell a $6.24 million issue. The deal includes $.2.64 million of deficit bonds, with a 10-year maximum maturity, that will replace bond anticipation notes. The rest of the offering is being sold as general purpose improvement GOs, with a maximum maturity in 20 years, that will replace outstanding BANs.
The city received permission from the state to sell the deficit bonds to shore up a troubled budget.
Moody's noted in a statement that "poor financial performance has led the city to issue deficit bonds for the second time since 1987."