Standard&Poor's Ratings Services affirmed its double-'A' long-term issuer credit rating on the Italian City of Milan on July 31, 2002, following an annual review. The outlook is stable. The rating is based on Milan's strong, diversified economic base; expected low deficits before debt repayment; and anticipated increased revenue dynamism resulting from the recent changes in Italian cities' revenue streams. The rating also reflects the city's heavy debt burden, and its limited revenue flexibility owing chiefly to the municipal government's unwillingness to increase tax rates. This is somewhat offset, however, by Milan's extensive assets, which could provide it with significant resources if needed. Higher-than-expected operating-spending growth, coupled with sluggish revenues, has squeezed Milan's operating margin, which was only 2.5%
