This past week, the markets started off in negative territory, and continued to fall until Thursday, when they were able to break the S&P 500's five-day losing streak. Investor optimism over last week's Fed taper news fell away as investors began focusing on the looming "fiscal cliff" at hand. In U.S. economy news, durable goods orders and new home sales came in better than expected, while initial jobless claims fell 5,000. Friday morning saw reports that August's personal income came in as expected, with a 0.4% rise, and spending met expectations as well, coming in at 0.3%. Treasury prices rose throughout the week, with Thursday clocking in the fourth straight day of higher prices and lower yields. Investors seem to expect that the American economy isn't showing enough strength to lead to bond buying tapering any time soon, while the impending fiscal cliff talks are sending investors into safer assets. Below, we outline the one upgrade and numerous downgrades Moody's made to municipal bonds this week.

Upgrades

• Renville County, MN: Moody's upgraded this county's general obligation bonds from Aa3 to Aa2. The Aa2 GO rating reflects the county's moderately-sized, rural tax base located in southwestern Minnesota (Aa1/stable outlook) experiencing rapid valuation growth driven by agricultural land appreciation; well-managed finances and healthy reserves; low debt burden with no future borrowing plans; and average pension liabilities.

Downgrades

• Robinson Memorial Hospital, OH: Moody's downgraded this hospital from Baa3 to Ba2. The rating downgrade is due to the hospital's steep volume declines and negative cash flow in 2013, and severe liquidity risk given its rate covenant breach and need to receive bank waivers in order to avoid debt acceleration.
• Multnomah County School District 3, OR: Moody's downgraded this school district from Aa3 to A2. The A2 rating reflects the district's sizable and concentrated tax base that has experienced real market value declines and modest assessed value increases below the state cap. The district has no tax rate flexibility to increase rates without voter approval, which they have no defined plans to request.
• Eastside Union School District, CA: Moody's downgraded this school district to A2 from A1. The downgrade reflects the erosion of the district's financial profile in recent years, highlighted by its extremely narrow liquidity and ongoing operating imbalance. We have removed the negative outlook because the district's financial profile is expected to stabilize at this weakened level and possibly improve in the near-term, albeit not enough to maintain the previous rating.
• Socorro Consolidated School District, NM: Moody's downgraded this school district to A2 from A1. The downgrade affects $1.7 million in Moody's-rated general obligation debt. The district has an additional $7.7 million in general obligation bonds not rated by Moody's.
• Village of Melrose Park, IL: Moody's downgraded this village to Baa2 from A3. The Baa2 rating reflects a substantial decline in the village's tax base valuation; weak socio-economic indices; unbalanced General Fund operations that have been subsidized with advances from the Water and Sewer Fund; elevated debt burden; and poorly-funded pension plans.
• Mason Public School, MI: Moody's downgraded this public school to A1 from Aa3. The A1 rating reflects the district's weakened though still adequate reserve levels. The A1 rating further incorporates the district's stable enrollment trend, limited revenue raising flexibility, moderately sized tax base, and average debt burden.
• Vandalia-Butler City School District, OH: Moody's downgraded this school district to Aa3 from Aa2. The downgrade reflects the district's diminished cash position as a result of unexpected revenue losses and the district's poor recent election history which has constrained the district's ability to offset those losses with new revenue.
• Newton Falls Exempted Village School District, OH: Moody's downgraded this school district to A3 from A2. The downgrade to A2 reflects the district's diminished financial position after consecutive deficits in fiscal 2012 and 2013 as the district was unable to bolster revenues with a new operating levy or sufficiently reduce expenditures to maintain reserves at a level commensurate with an A1 rated issuer.
• District of Columbia Revenue Bonds (The Howard University Issue), DC: Moody's downgraded this district's Series 2011A and Series 2011B (Taxable) to Baa1 from A3. The downgrade is driven by pressure on all of the university's major revenue sources. The negative outlook reflects an aggressive Fiscal Year 2014 budget that may prove difficult to implement in light of pressure on hospital operations, continuing soft enrollment, and a slow start to implementing planned efficiencies. It also reflects renewal risk associated with a revolving line of credit upon which the university relies for liquidity.
• Successor Agency to the Santa Cruz County Redevelopment Agency, CA: Moody's downgraded this successor agency Ba2 from Ba1. The downgrade to a Ba2 rating is driven by changes to California law that dissolved redevelopment agencies (RDAs) and changed the method by which the successors agencies to the RDAs receive incremental tax revenues to pay debt service on tax allocation bonds; as a result of these changes, we project that debt service coverage net of pass-through payments will remain narrow on an annual and semi-annual basis.
• Successor Agency to the Port Hueneme Redevelopment Agency, CA: Moody's downgraded this successor agency to Ba2. The downgrade to Ba2 is driven by changes to California law that dissolved redevelopment agencies (RDAs) and changed the method by which the successors agencies to the RDAs receive incremental tax revenues to pay debt service on tax allocation bonds; as a result of these changes, we project that debt service coverage net of pass-through payments will remain below the threshold to be considered investment grade.
• Jenison Public Schools, MI: Moody's downgrade this public school district to Aa3 from Aa2. The downgrade to Aa3 primarily reflects a modest, though steady, weakening of the district's financial position over the past few years. Though preliminary estimates for fiscal 2013 indicate positive General Fund operations, the anticipated surplus does not offset the amount by which reserves declined through fiscal 2012.
• Kootenai County School District No. 273, ID: Moody's downgraded this school district to A1 from Aa3. The downgrade of the district's underlying rating to A1 from Aa3 reflects the weakness in the district's finances characterized by thin general fund reserves and no near-term plan to restore fund balances. The A1 rating recognizes the stabilization in the district's tax base, below-average socioeconomic measures, ample liquidity, and rapid debt repayment.
• Clawson City School District, MI: Moody's downgraded this school district to A2 from A1. The downgrade to A2 primarily reflects the district's weakened financial position following an estimated$800,000 draw on reserves in fiscal 2013. The rating also incorporates a moderately-sized tax base, above average socioeconomic profile, modest enrollment growth, above average debt burden that is expected to increase, and exposure to an underfunded statewide cost-sharing pension plan.
• Rhode Island Economic Development Corporation, RI: Moody's downgraded this development corporation's Rhode Island Motor Fuel Tax Revenue Bonds to A3 from A2. The rating was downgraded to A3 from A2 because motor fuel tax collections have continued to deteriorate over a multi-year period, causing coverage of maximum annual debt service to fall below the additional bonds test.
• Stratford, CT: Moody's downgraded this town from an Aa3 to an A1. The downgrade to A1 from Aa3 incorporates Stratford's diminished financial flexibility resulting from increased fixed costs related to the town's severely underfunded pension plan. The A1 rating also incorporates the town's narrow general fund position, sizeable tax base with average demographics, and leveraged debt position which will increase considerably when the pension obligation bonds are issued.