DETROIT (WXYZ) - Moody's Investors service has downgraded all of the city of Detroit's bond debt due to the city's "ongoing precariously narrow cash position and a weakened state oversight framework following the repeal of Public Act 4."
"I'm not surprised by that. We're as low as I think we can be. We've got to make sure we understand that we need the state," said Mayor Dave Bing.
The downgrade on $8.2 billion of the city's debt, per the Moody's report provided to 7 Action News, is based on the "rising possibility that the city could file for bankruptcy" or default on repayment of debt over the next 12 to 24 months, as well as uncertainty on how state support and oversight will help head off the financial crisis.
Analysts for the agency say the city's bonds are judged to be of poor standing and are subject to very high credit risk. They believe the chances of default and/or bankruptcy are higher now than before the downgrade.
The report cites several challenges:
-Ongoing state oversight of the city's finances which may result in appointment of an emergency financial manager, which is the first step to filing for bankruptcy.
-Timely implementation of restructuring provisions outlined in the Financial Stability Agreement and ongoing political instability.
"I think the state has a responsibility. I think they are willing to step up and help out. Once again we've got to stop trying to have all this end fighting. Here in the city at the state level. That doesn't solve our problem. What happens is in the end we still have to fix a broken city and that's what I'm going to focus on," said Mayor Bing.
Moody's also downgraded the ratings for the Detroit Water and Sewerage Enterprise Revenue debt "as the rising risk of a city bankruptcy filing brings ongoing uncertainty" to the repayment of this debt as well.
Meanwhile, the Fitch ratings agency has not changed their ratings for the city's bond debt. However, in a report issued today, analysts for Fitch say that Detroit city government may be out of cash by the third week of December unless corrective action is taken.
The Fitch report adds that "progress toward achieving financial reform goals is contingent upon cooperation among the various branches of city government and between the city and state.
The instability of the city's financial position is reflected in the fragility of these relationships and the difficulty in achieving the identified milestones."
Stay tuned to 7 Action News and WXYZ.com for more information on Detroit's cash crisis.