City’s Bond Rating Takes a Plunge : Finances: The lowered rating will mean that the city will have to pay a higher interest rate on future bond issues.

A New York rating agency has reduced financially troubled Baldwin Park’s bond rating from A to BBB-, the lowest “investment grade” rating.

Bonds rated below BBB- are considered too risky for prudent investment, said a spokesman for the rating agency, Fitch Investors Service. The lower rating means that Baldwin Park will have to pay a higher interest rate on future bond issues.

The rating is based on “a decline in the city’s overall credit characteristics,” including a city redevelopment agency commitment to cover the losses of Baldwin Park Hilton, said Stewart Simon of Fitch.

Mayor Bette L. Lowes has complained recently that Baldwin Park is so financially strapped that “we’ve not only cut down to the bone, we’ve cut to the marrow.” In any case, City Manager Donald Penman said Thursday that Fitch was overreacting.

Fitch’s bond rating pertained to some 1989 certificates of participation--that is, notes issued to finance civic projects--whose proceeds were used to build a community center in a separate redevelopment area from the hotel, according to the bond report.

The rating service said the increased risk was because of ongoing litigation with Hilton that could lead the hotel company to go after other city resources.

The Hilton, next to the San Bernardino Freeway, was built in 1989 with the understanding that the redevelopment agency would cover any losses during its first 10 years of operation. The losses have amounted to about $3 million, and the city has stopped paying $125,000 a month to cover them.

Hilton sued, and the city countersued, claiming that the redevelopment agency did not have the authority to make the original deal. But even if the city loses in court, Penman said, its obligations are covered by reserves.