The rating reflects Milan's good liquidity position, profitable shareholdings and real estate, strong fund balance, and low contingent liabilities. Offsetting these are weakened budgetary performance, limited financial flexibility, fairly low self-financing capacity, large investments, and a heavy debt burden. Since 2006, Milan has reported negative operating margins due to increasingly large and rigid operating expenditure and almost flat operating revenues. The operating margin, excluding urban concession fees used to finance operating expenditures, was about zero in 2008 (negative 1.1% of operating revenues in 2007). Recent national legislation froze Italian local and regional governments' ability to use their residual tax flexibility; Milan's could have generated an additional estimated 15% of operating revenues this year. As before the law was passed Milan
