Buffalo, N.Y., officials want to convince a major credit rating agency to remove its negative outlook on the city's outstanding debt, as the city prepares to sell $35 million of bonds at the end of November.

At the moment, Standard & Poor's Corp. rates the city's debt BBB, with a negative outlook. The city is rated Baa by Moody's Investors Service.

As part of the deal, the city plans to issue $25 million of tax-exempt general obligation bonds for general infrastructure improvements and school construction, and $10 million of taxable bonds to help finance a new arena for the Buffalo Sabres hockey club.

Buffalo Comptroller Joel Giambra said it is his "objective" to convince Standard & Poor's to take its negative outlook off the city's bonds.

The city has made strides in reducing its structural budget deficit, Giambra said. This gap could be shrunk even more if Standard & Poor's removes is negative outlook, and bond dealers bid more aggressively on city debt, he said.

Standard & Poor's assigned its negative outlook on Buffalo bonds in 1992, when the rating was downgraded to BBB from BBB-plus. During its last full review of Buffalo in February 1994, Standard & Poor's did not remove the negative outlook, citing concerns about litigation over a teachers' contract, and Buffalo's structural budget deficit.

The city has since won a favorable court ruling on the contract dispute with the union.

Diane Brosen, a director at Standard & Poor's, confirmed that the agency will discuss its rating with city officials during the week of Nov. 20 in conjunction with the GO sale schedules for Nov. 28.

She said a rating agency committee would make its decision public after it has met with city officials.

Moody's Investors Service also has Buffalo's rating under review. A Moody's executive who covers Buffalo did not return several telephone calls.

For its fiscal 1995 budget, which began July 1, the city closed a $36 million gap, which included the use of $3 million in one-shot measures. The city's budget is $242 million.

The one-shots included a $1.5 million sale of a parking ramp, and a $700,000 settlement between the city and Erie County on a hotel bed tax.

Even so, analysts say the city's finances are beginning to improve as the city's new mayor, Anthony Masiello, and the city council cooperate more on budget matters. In addition, analysts say the city is improving its forecasts of revenues and expenses.

Moreover, Giambra cited a recent state supreme court ruling that the Buffalo Board of Education has no legal obligation to pay $142 million in retroactive raises to its teachers' union. The ruling removes "a black cloud that had been hanging over the city's head for four years," Giambra said.

Still, Buffalo isn't taking any chances on its next bond deal. Giambra said he is thinking about getting the bonds insured, which would ensure a triple-A rating.

Buffalo has selected First Albany Corp. as senior manager for both the tax-exempt and taxable bonds. The city's financial adviser is Government Finance Associates Inc.

During the week of Nov. 14, Buffalo will issue about $80 million of revenue anticipation notes backed by a letter of credit. The city has yet to choose a bank or receive a rating on the securities. Donaldson, Lufkin & Jenrette Securities Corp. will serve as senior manager on the Rans issue.

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