PHILADELPHIA, NOV. 17 -- Citing the "scant progress" city officials have made toward solving the financial crisis, Moody's Investor Service has demoted two more municipal bonds to junk-bond status.
On Friday, Moody's dropped the rating of Philadelphia's water and sewer bonds from Baa to B. The airport revenue bonds dropped from Ba to B. Nancy Barbe, Moody's assistant vice president, called it a "very significant" drop.
Unless action occurs in the next several weeks, the city expects to run out of money by mid-December, disrupting payroll and services.
An effort to avoid the immediate crisis by floating $375 million in short-term notes last August failed when banks refused to guarantee them.
In September, Moody's lowered the city's general obligation bonds to a B rating, one rating short of default, following a Standard & Poor's Corp. move to drop the rating to CCC, the lowest among major U.S. cities.
Standard's rating indicates Philadelphia is vulnerable to default on bond payments.
Mayor W. Wilson Goode and other Democratic leaders in the state have proposed trying to float another bond sale to keep from going broke. They also want to raise taxes, pry more money out of the state and federal governments and sell city assets to head off a $229.5 million deficit at the end of the fiscal year.
The plan, released earlier this month, received a poor reception from the City Council and Republicans. Moody's called it vague. Two members of the City Council have promised to offer alternatives.