The Negative Rating Outlook reflects a considerable decline in Brook Park's financial flexibility, coupled with instability at the Ford Motor Company (Ford) that has affected the local economy. While overall reserve levels remain adequate for the rating category, several consecutive years of operating deficits reduced the city's unreserved general fund balance to 20% of spending in calendar 2008 from 56% in 2003 at the time of Fitch's last review. Further deterioration is expected to continue in 2009, leaving the city with an unreserved general fund balance equal to approximately 11%-13% of spending. Ford recently reopened an engine plant that had been idled in Brook Park for a number of years, demonstrating a commitment to the area. However, a casting plant employing approximately 800 is scheduled to close in mid- to late-2010, which could further weaken economic indicators.

Fitch is likely to take additional rating action if negative financial results deepen beyond what is expected in 2009 or economic indicators deteriorate over the next one to two years. Officials report that the city prudently built up fund balances in anticipation of challenging conditions at Ford. However, the continued use of reserves to provide budgetary balance reduces the city's financial flexibility. A return to budgetary balance, which Fitch believes is uncertain without structural change, is critical to maintaining the city's credit rating.

The 'AA-' rating reflects the city's slightly below-average economic indicators; still healthy fund balance levels, including additional reserves outside of the general fund; and very minimal debt burden. The city maintains at least $2.5 million of reserves that can be transferred to the general fund by a majority vote of city council, which would add a considerable 50% to 2008 levels, and the debt service fund maintains additional balances. In addition, officials are evaluating options to increase the city's revenue-raising ability in the coming year.

Brook Park is a mature suburban community located in Cuyahoga County approximately 10 miles southwest of downtown Cleveland. The city's 2008 population of 19,194 represented a nearly 10% decline from the 2000 Census figure, underscoring a weakened local economy that has shed a large number of jobs principally at Ford. The city's July 2009 unemployment rate climbed to 10.1% from 6.8% in July 2008. Income levels are slightly below average. Overall debt ratios register a low $826 per capita, or 1.2% of the city's tax base, and Fitch expects debt ratios to fall, as the city has no bonding plans or major capital needs.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 'www.fitchratings.com'. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

A service of YellowBrix, Inc.