Business / Technology

Fitch, one of the nation's three leading debt-rating companies, has downgraded two Tacoma bond issues, saying the city's gaping budget hole prompted the move.

The bonds, with a total face value of $207.4 million, were cut from AA+ to AA — Fitch's third-highest investment-grade ratings.

The bonds also were placed on a negative rating watch, meaning a further downgrade is possible if the city does not take steps to close the budget gap within the next six months.

Late last year, the city identified a $31 million deficit in its general fund for the current two-year period, which ends Dec. 31; the general fund had been projected to be balanced as recently as September. In addition, the projected gap for the 2013-14 budget cycle grew from $15 million to more than $75 million.

The swift reversal of Tacoma's fiscal outlook "raises concerns about the city's budget monitoring capabilities," Fitch said in a statement.

The city has proposed to lay off about 100 police officers and firefighters to help close the gap.

The general fund accounts for about 15 percent of the city's total budget. Fitch said the city's overall liquidity was adequate and it continues to have a good debt profile.

The downgrade does not affect Tacoma's outstanding convention-center and parking-revenue bonds, though Fitch said, it "retains concern about general fund vulnerability to deficit operations in the convention center and parking enterprise funds."

Drew DeSilver: 206-464-3145 or ddesilver@seattletimes.com