Fitch Ratings issues latest downgrade to New Orleans bond rating
By Ben Myers
Source: The Times-Picayune | NOLA.com
December 20, 2025
Another major ratings house downgraded the City of New Orleans’ credit this week, signaling widening concern among investors about the city’s financial stability. The Fitch Ratings downgrade on Wednesday follows a similar action in October by Moody’s Ratings, which cited a structurally imbalanced city budget, economic headwinds and other factors.
Despite the downgrades, Fitch and Moody’s both continue to rate the city’s bond issuances as worthy of investment, though they are also warning of future downgrades if the city doesn’t improve its fiscal management.
New Orleans now rates an “A-” on Fitch’s scale, meaning the city is seen having a strong ability to meet its financial commitments, but could “be more vulnerable to adverse business or economic conditions,” according to Fitch’s website. Any additional downgrade would drop the city into Fitch’s middle tier, where the risk of default increases.
Fitch noted “a precipitous decline in New Orleans’ financial resilience,” evidenced by the city’s recent decision to issue $125 million in short-term debt to cover payroll expenses. The assessment also noted “an uncertain path to resolving a large structural imbalance and management instability.”
Fitch also assigned a negative rating watch, meaning an additional downgrade could be coming after further evaluation, which is expected in the next six months. The negative outlook should concern city officials as much as the rating itself, said Rebecca Mowbray, CEO of the Bureau of Governmental Research, a nonpartisan public policy watchdog.
“They only downgraded it incrementally, but the language is quite strong and quite specific,” Mowbray said. “What they’re telling the city is they’re going to be watching closely, and so it is imperative that the city make sound financial decisions in the next six months.”
The city’s bond ratings determine the cost of borrowing, including an upcoming $510 million bond sale that voters approved in November for a range of infrastructure and housing projects. Lower ratings can make it more difficult to attract investors and can lead to higher interest rates. It’s not clear when the bond sale will take place, and Mowbray said the Moreno administration should carefully consider the timing.
“You’ve got these two ratings agencies that have downgraded. But on the optimistic side, Fitch is saying they’re going to take another look in the next six months. It’s a possibility that something could be better in six months,” Mowbray said.
Moody’s criticized the city’s use of reserves to balance the 2025 city budget in its October report. At that time, the extent of the city’s $160 million spending deficit wasn’t clear and Mayor LaToya Cantrell’s administration hadn’t yet disclosed a cash shortage that led to the payroll crisis. The Moody’s report came just days after Cantrell proposed a significantly reduced 2026 city budget, which the council disregarded in favor of plan that Moreno advocated.
Cantrell vetoed the Moreno budget, citing concerns over $75 million in new revenue that Cantrell said hadn’t been verified. The council on Thursday voted unanimously to override the veto, and Moreno has said she will convene a meeting of the city’s Revenue Estimating Conference on her first day to formally evaluate the new revenue. Moreno takes office on Jan. 12.
Fitch highlighted the veto and noted Cantrell’s concerns, without opining on the budget the council passed — but it said further analysis is coming.
“Fitch will review details of the final adopted budget, the reasonableness of its underlying assumptions and the extent to which it establishes a path for the city to return to structural balance,” the Fitch report said.
In a statement, Moreno’s transition team said the Fitch report “largely reflects fiscal challenges that the incoming administration is confronting.”
“Mayor-elect Moreno has already taken steps to right the ship, including putting forward a balanced budget with increased revenue that was unanimously approved by the City Council,” the statement said. “We are committed to charting a more sustainable path forward for New Orleans.”
The Cantrell administration did not respond to a request for comment.
Councilmember Lesli Harris, who will chair the budget committee starting next year, said the downgrade “underscores the urgency of the work ahead.” Harris said she will maintain strict oversight of city payroll and other spending.
“I am confident that with disciplined budgeting, transparency and strong coordination, we are on track this year to improve our credit rating,” Harris said.
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