PHOENIX (AP) -- One of the world's largest credit-rating agencies downgraded the marks of the nation's sixth-biggest city because of the local economy's performance, debt and other financial liabilities.
Standard and Poor's announced the newly adjusted rating Friday. Changes in criteria mean ratings are now largely based local economic conditions, and in Phoenix, property values suffered during the downturn. If market values were to climb, S&P says the city's score could improve.
The rating affects the city's ability to borrow money. With a lower rating, Phoenix may have to pay more in interest to issue bonds in the future.
While the city's AA+ rating is still among the highest for the nation's largest cities, acting City Manager Ed Zuercher said it's disappointing anytime a bond rating is downgraded.
"S&P's new criteria places great scoring emphasis on the one aspect of our economy that was hit the hardest during the Great Recession - property values," Zuercher said, noting that such values are not within the city's control.
City officials had tried unsuccessfully Friday to get S&P to hold off on its decision.
City Council members said that the downgrade was a wake-up call.
"Is the downgrade huge?" Councilman Sal DiCiccio asked. "No, it's not. But it's a warning bell. You have to actually have a real plan in place that prevents Phoenix from being the next Detroit."
S&P noted that the city has managed its budget proactively in recent years and has high levels of available cash but it noted weakness due to the city's amount of debt and liabilities.
Analysts compared the city's outstanding general-obligation debt, which is usually paid from sales and property taxes, to revenue over the course of the year. According to the report, Phoenix's payments on its debts made up nearly 10 percent of its total governmental expenses for the last fiscal year.
The report also mentioned the city's unfunded pension liabilities.
DiCiccio suggested Phoenix needs to get serious about pension reform and make changes beyond modest reforms enacted this year. He said the city must realize its growing budget impacts its ability to pay down long-term debt.
Mayor Greg Stanton said in a statement that the pension reforms will save taxpayers $829 million over the next 25 years. He added that during his tenure, the city will continue to retire its debt and maintain sound fiscal policy.
"We'll continue to work together to improve our economy, create good jobs and lead Phoenix through the lingering impact of the Great Recession," Stanton said.
© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.