Manassas Park, situated between Prince William County and the City of Manassas, got a bit of good news this week, after being criticized last month for its financial situation.

The 2.5-square-mile city of almost 14,000 people was ranked 56th on CNN Money’s list of top 100 places to live in the country. Leesburg was ranked fourth; Herndon, 34th; Montclair in Prince William, 35th; and Oakton, 36th.

“I’m very pleased we were selected, and there was no advance notice to the city,” Manassas Park Mayor Frank Jones said. “I think it’s attributable to the fact we are a small, close-knit community that’s maintained its own identity.”

CNN Money looked at cities nationwide that had between 8,500 and 50,000 residents, according to its Web site. The magazine considered several factors in the rankings, including population growth, schools, safety and fiscal strength.

Manassas Park’s small size and sense of community is what attracts people to the city, Jones said. Manassas Park prides itself on its new school system — rebuilt within the past 12 years — and its family friendly community events.

But being small has also made it harder to weather the economic downturn, he said.

Standard & Poor’s, which recently downgraded the federal government’s credit rating, lowered Manassas Park’s rating from AA- to BBB and made the rating outlook negative, according to a July news release from Standard & Poor’s. Moody’s has not changed its A1 rating for Manassas Park, City Manager James Zumwalt said.

“The downgrade reflects our assessment of the significant and rapid deteriorations of the city’s financial position . . .coupled with the lack of a clear and timely plan to restore fiscal stability,” said Standard & Poor’s credit analyst Danielle Leonardis.

Jones said the rating change is a reflection of the downturn in the real estate market, which has impacted numerous Northern Virginia localities. Manassas Park lost one-third of the assessed value of the city, mainly on the residential side, he said.

“We are smaller, so when something [like an economic downturn] happens, it tends to magnify itself in our community,” Jones said. “I believe S&P overreacted..”

The city is trying to build up its commercial base, however the town center development built within the last few years, still has no commercial occupants. Its residential units, however are almost 100 percent full, Jones said.

The city also has a lot of debt since officials have essentially rebuilt Manassas Park in the last 10 years, including all its schools, police station and recreation center. As of June 30, 2010, the city’s debt was $117 million, Zumwalt said.

Credit ratings help localities get better interest rates when they issue bonds for large projects. But because Manassas Park officials have completed their large construction projects, they don’t plan to issue bonds anytime soon, Zumwalt said. Instead, they plan to just pay off the debt.

The City Council also recently passed a resolution that prohibits the city’s treasurer from spending down the school debt service fund — meant to pay off debt from building the schools — until the city can build up its reserves. Zumwalt said the goal is to have a reserve fund balance that equals 15 percent of the city’s annual revenues. As of June 30, 2010, that balance was almost 4 percent.

“We talked to an analyst with S&P about the economic situation in the city and they were concerned that the fund balance had been drawn down dramatically,” he said. “Historically we maintained that balance, but when we went through the recession, we had to” draw it down.

According to a news release from Standard & Poor’s, the rating agency’s “negative outlook” for Manassas Park reflects its view of the city’s “modest attempts to restore structural balance and reserves.” If the city’s reserve is restored, however, the rating agency could consider a “positive rating action.”

“The change in rating was more than I expected and hoped, but the city will build back its fund balance,” Zumwalt said. “I’m confident that our ratings will change back up in the other direction.”