CHICAGO - Detroit officials are charging that Moody's Investors Service used new and inconsistent criteria in rating the city's general obligation debt when it downgraded the city to the non-investment grade rating of Ba1 from Baa on Thursday.

In a press release issued late Thursday afternoon. Mayor Coleman Young charged that the criteria used by Moody's in its rating decision "is substantially different from the criteria Moody's has used to rate any other large American city."

The mayor pointed out that instead of concentrating on the condition of Detroit's budget, Moody's "has established a new set of goals for Detroit."

"This new criteria is based more on generalizations involving Moody's view of where Detroit's economy might be headed in future years, rather than on an evaluation of this administration's proven track record of tough fiscal management and our current fiscal situation," the mayor said.

Bella Marshall, Detroit's finance director, in a telephone interview on Friday, questioned whether Moody's has changed the way it looks at major urban credits beginning with Detroit.

"If the factors are going to be changed for urban areas then we need to know because we are so very confused," Ms. Marshall said.

In its release on the downgrade, Moody's said the rating action was the result of "weak credit fundamentals, which detract from long-term credit quality, despite the city's history of continued efforts to maintain control over its budgetary operations." The downgrade affects $272 million of Detroit's GO unlimited tax debt.

Moody's pointed out that those credit fundamentals include "a declining and economically distressed population, a dearth of private sector economic activity other than that requiring substantial public inducements, chronically high unemployment and an exceedingly high debt burden comprised largely of limited tax obligations, which place substantial claim on scarce operating funds."

Ms. Marshall said that many of those factors apply of a lot of cities.

When asked whether the mayor was implying that Moody's considered the racial makeup of the city in its rating action. Ms. Marshall said one of the things inherent in urban America is a large number of minorities.

The majority of Detroit's population consists of blacks and other minorities.

On Friday, Bob Berg, Mayor Young's spokesman, said, "It is a fact that in that section at Moody's there aren't minorities."

Jeffrey F. Rizzo, vice president and managing director at Moody's, declined to comment on the racial makeup of the rating officials.

Mr. Rizzo, however, defended the rating action, saying that the criteria and credit fundamentals that the agency looked to for Detroit were identical across the board for other issuers.

"We're not setting any different or additional standard for Detroit," he said.

He said that Moody's have not changed its criteria but cities have been facing greater challenges because because of the recession and less aid from state and federal government.

Mr. Berg said despite comments from the rating agency that it was looking for the city to restore balance to its budget, Moody's ignored the $2.12 billion budget the city put in place for the fiscal year that began July 1.

"In announcing the downgrade, Moody's in effect said it makes no difference that we've balanced the budget. Instead, they think that several years down the road Detroit is going to have major problems," he said. "That was the first time in our knowledge any city's rating was based on that judgment."

J. Chester Johnson, president of Government Finance Associates Inc., Detroit financial adviser, agreed that Moody's was applying a different standard to Detroit.

"This is the first time I had ever experienced a rating agency essentially stating that a city was not viable in its current characteristics," he said.

"[Moody's] wants to see a new city on the hill," Mr. Johnson added. "They obviously don't like Detroit and its current institutional, governmental, and demographic characteristics. So, they are looking for a brand new Detroit and we don't have one to offer them."

At the same time Moody's downgraded the city's GO debt, the agency assigned a Baa rating to an upcoming approximately $110 million deficit funding bond issue that the city plans to use to help eliminate a $248 million budget deficit over fiscal 1992 and fiscal 1993, which began July 1.

Moody's said with the use of the bond proceeds to fund the deficit "the city enters fiscal 1993 with a somewhat improved prospect of near-term budget balance and stability."

But while the agency conceded that the city could achieve a balanced operation, it said that "provides little comfort that the pressures exerted by extraordinary weak credit fundamental will not lead to recurring fiscal distress and eventually require still further shrinkage of a municipal government that has already undergone continuous and substantial down-sizing."

The city's budget includes a number of cost-saving measures, such as a employee pay freeze and rollback and debt refundings that are dependent on union agreements and voter and state approval before they can be implemented.

As of Friday, Mr. Berg said the mayor had taken action to cut the pay of 1,800 non-union employees by 10%, had an agreement from the Teamsters Union for 10% paycuts for its 1,000 city employees and had laid off 125 members of the American Federation of State, County and Municipal Employees Union after contract talks broke off. Mr. Berg said that union, which represents about 6,000 city workers, was back at the bargaining table and that if it accepts the paycut, most of the city's remaining 45 unions were expected to follow suit.

Another budget cost cutter that involves restructuring $122 million of outstanding limited tax bonds as unlimited tax GO bonds is pending voter approval in August. If approved, the restructuring would save the city's general fund $12.6 million a year, according to city officials.

Moody's also said that the city's fiscal position "can only be stabilized by the implementation of some fundamental reforms." As for those reforms, Moody's pointed to productivity savings and privatization proposals made earlier this year by a special committee of business, labor, and community leaders appointed by the mayor.

Mr. Berg said the city adopted a number of the committee's recommendations in the current budget and is in the process of reviewing others.

"That sort of stuff, you phase in," he contended.

The ratings action by Moody's leaves the city with one investment-grade rating - BBB with a negative outlook - from Standard & Poor's Corp.

Mr. Johnson said he did not believe the split ratings would stop the city from continuing to access the debt market.

"I think the city will continue to have access to the markets. It still has an investment-grade rating from Standard & Poor's, and Moody's's rating is not as low as the Ba rating the city had in the early 1980s," he said. "It will make it more expensive, but there is still a market for [Detroit debt.]"

Mr. Berg said the city still plans to sell approximately $110 million of deficit funding bonds the week of Aug. 3 and that it plans to pursue the issuance of $22.3 million of GO bonds for various projects this fiscal year.

The deficit bonds, which will be sold in a deal headed by Merrill Lynch & Co., still need approval from Michigan state Treasurer Doug Roberts for the use of state aid to back the bonds and for the city's plans to incorporate an interest rate swap into the transaction.

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