Moody's Investors Service on Friday warned the municipal bond community that last week's approval of a Colorado voter referendum could have serious fiscal implications for credits throughout the state.

Moody's said in a one-page statement that the amendment, approved by Colorado voters Nov. 3, will "significantly affect the financial and debt management practices of the state, and all levels of government, with the possible exception of certain defined enterprise systems."

Broadly, the constitutional amendment, known as the "Taxpayer Bill of Rights," requires a vote on "all long-term financial obligations" and establishes yearly expenditure caps for state and local governments.

Ditmar Kopf, a Moody's assistant vice president and lead analyst for Colorado, said the agency's statement was an attempt to "Iet the bond community know" that the measure could force a deterioration in the long-term credit outlook of bonds issued by the state and its municipalities.

Kopf said the amendment places severe financial limitations on the state and its localities, which could lead to a future rating action. "We're concerned that issuers in the state have lost a great deal of financial flexibility," he added.

Moody's said in the report that any rating change would not be immediate in part because the law does not eliminate any existing revenues. The agency grades 230 issuers in Colorado that are supported by tax payments and other revenues.

But the rating agency's key concern is that further economic declines may not be met with swift government action to raise revenues or cut expenditures. As a result, all debt that is supported by a revenue stream, such as lease rental bonds and certificates of participation, is most at risk of a downgrade.

Colorado Treasurer Gail Schoettler said the long-term effects of the amendment, though unclear, could be devastating for local governments because the state is barred from issuing long-term debt.

For their part, local governments must receive voter approval to issue bonds. The voters must also approve debt service levels. But the new law would make it difficult for municipalities to pay debt service if revenues fall short.

"Do they have to go back to voters if the revenues fall short?" she said. "No one knows. This will be something that will likely be adjudicated." The Moody's report is the second public notice the rating agency has issued in response to the proposed amendment to the constitution, which was written by Douglas Bruce, a landlord.

In September, Moody's also warned that the amendment could affect the credit quality of the state and its localities.

The state of Colorado has $203 million of debt outstanding, most of which are lease revenue bonds. The state is barred by law from issuing general obligation securities.

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