(The Center Square) – S&P Global Ratings changed its outlook for San Francisco’s outstanding bonds from stable to negative, citing the slow recovery in the city and county.

S&P Global Ratings, one of the Big Three credit-rating agencies, revised its outlook to negative from stable on the San Francisco City and County outstanding general obligation debt.

“The negative outlook reflects our view of the slow recovery of the city’s major revenue streams and growing budgetary expenditures that will likely lead to continued general fund shortfalls and draws on existing reserves if management doesn’t make substantive budgetary corrections in the near term,” the S&P Global Ratings report stated.

Despite the city’s strong reserves, S&P remains concerned about the city’s ability to correct course.

“The city forecasts consecutive deficits in the coming years that could, in the absence of corrective action or a materially stronger revenue recovery, substantially drain its reserves with evidence of an emerging structural imbalance, resulting in a weaker credit profile,” according to the report. “The recent general fund deficit in fiscal 2023 as well as the forecasted deficits in the city’s five-year forecast, is a consequence of the stagnant economic recovery in the city’s downtown center, which has weakened property tax and business tax growth, coupled with an absence of sufficient budgetary corrections.”

Making the right changes could prove difficult, S&P said.

“We believe the city will be challenged to make the cuts needed to fully restore budgetary balance during the outlook horizon and support a delicate economic recovery that leads to robust growth in underlying revenues needed to support the city’s growing budgetary costs,” according to the report.