LOS ANGELES -- Moody's Investors Service said Friday it has placed the Aa rating of Maricopa County, Ariz., under review for a possible downgrade because county supervisors have not developed a way to close a $60 million fiscal 1995 budget deficit.

A rating action on the county's $176.03 million of general obligation bonds outstanding is "most likely" to occur next month when the county refunds two series of bonds totaling $33.05 million, Moody's assistant vice president Chris Mushell said.

The county needs to close a $60 million budgeted operating deficit next fiscal year, which begins July 1, and it faces a current fiscal year deficit of $22 million, Moody's said.

To close the current year's gap, supervisors plan to refund two series of bonds maturing in fiscal 1994 and 1995, but Mushell said this is a "one-time thing" that is unlikely to steer the county "into the black."

Consequently, Mushell said Friday, "we decided to put the county's bond rating under review."

Moody's in July 1993 downgraded the county's GO debt to Aa from Aa1. The county has $385 million of certificates of participation outstanding, rated A by Moody's, and $100 million of tax anticipation notes, due July 29, rated MIG2.

Maricopa County chief financial officer Deborah Larson said she and administrative officer Barbra Cooper "spent the morning with the board discussing the Moody's disclosure." Larson said she and Cooper "emerged from the meeting with a renewed sense of commitment from the board to make the tough decisions necessary to tackle the financial challenges ahead."

"No politician will say the best way [to close a budget gap] is to raise property taxes, and Moody's doesn't want to say that either," Mushell said. "Moody's will say, however, that supervisors still have some expenditure cuts they should do."

Supervisors recently cut about 300 employees and placed "thousands" more on four-day, unpaid work furloughs, the Moody's release said. The moves, however, have not been sufficient to address the structural budget deficit, the release said.

County "financial management lacks control over selected departments headed by independently elected officials, such as the justice and law enforcement departments, thus severely limiting the county's ability to curb expenditures," the release said.

Mushell questioned the county supervisors' approval in February of a quarter-cent sales tax to raise $238 million toward the cost of building a proposed major league baseball stadium in downtown Phoenix.

"Since they're not willing to raise property taxes, but are raising sales taxes for a stadium, does that mean they don't have political will to get their financial operations in order?" Mushell said. "It is more complicated than saying yes or no."

Increasing property taxes to cover the deficit is not necessarily "the most comprehensive way for the county to get out of its financial difficulties," Mushell said. "There are identified expenditure cuts the county can do" in lieu of tax increases.

The county's economy is improving, "as evidenced by strong sales and income tax growth," the Moody's release said. "However, property values have not yet rebounded from two years of declining values. It is noted that the county assessor's ability to capture growth and new construction on the tax rolls on a timely basis has been questioned."

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