Fitch cuts Atwater, Calif., sewer debt, cites city's deficit

SAN FRANCISCO, Sept 28 (Reuters) - Fitch Ratings on Friday lowered its rating on $19.6 million of wastewater revenue bonds issued by the Atwater Public Finance Authority to BB from A-minus and warned of more downgrades, citing concerns that the City of Atwater could use revenue pledged to the debt to help close its budget gap.

Atwater faces a $3.3 million shortfall and is mulling a fiscal emergency declaration as a first step toward a Chapter 9 bankruptcy filing.

Fitch said it believes the city of 28,000 in California's Central Valley sees its sewer system's funds as "available to support operating deficits from other city funds."