Moody's Downgrades Baltimore Credit Rating to Aa3

Moody's Ratings downgraded the credit rating of the Government of Baltimore from Aa2 to Aa3 this month, citing a multi-year trend of declining cash levels and fund balances across government operations. The agency noted that these declines have persisted since the pandemic despite stabilization efforts and are primarily concentrated in internal service and utility funds. While Moody's shifted the city's outlook from negative to stable and stated the move does not indicate an inability to pay debts, the downgrade may increase interest rates for future bond issuances for a city with over $4 billion in outstanding debt.

Mayor Brandon Scott attributed the downgrade to temporary drawdowns in utility reserve funds, arguing that the General Fund's performance has improved across nearly all metrics. Scott maintained that utility performance should not be conflated with the city's overall financial strength. Conversely, City Councilman Mark Conway called for immediate scrutiny, stating the council must use its budget authority to address these issues before they become more costly for taxpayers.

The rating action comes as Baltimore officials prepare to ask voters in November to authorize $280 million in additional borrowing for infrastructure projects, including schools, housing, and roads.