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By Bloomberg

Ferguson, Missouri, a city torn by violent protests since August when a white policeman shot and killed an unarmed black man, had the outlook of its debt changed to “negative” by Moody’s Investors Service.

The rating company cited the St. Louis suburb’s projected need to tap reserves to close budget gaps in the 2014 and 2015 fiscal years ending in June 30. The municipality plans to deplete a $10 million capital-projects fund to cover a revenue shortfall in fiscal 2014 and draw on a $10.3 million unassigned reserve to close a $4.09 million deficit in fiscal 2015.

“The maintenance of healthy operating reserves will be a focus of future credit review,” New York-based Moody’s said Dec. 16 in a statement.

Ferguson has $7.3 million of general obligation debt rated Aa3, the fourth-highest grade, and $10.9 million of certificates of participation, rated A1 and A2, the fifth- and sixth-highest ratings, according to Moody’s.

Continued budget deficits and an inability to maintain reserves at satisfactory levels may trigger a downgrade, as well as an unexpected drop in revenue or increases in expenditures pressuring the general fund, Moody’s said. A decline in the demographic profile of the city also might cause a rating cut.

Moody’s said it will monitor trends in Ferguson’s sales tax receipts, the city’s primary source of cash, following the latest civil disturbances. Last month some businesses were destroyed by rioting after a grand jury didn’t indict the police officer, Darren Wilson, who shot and killed 18-year-old Michael Brown.

“While the recent civil unrest in Ferguson does not present a direct credit pressure, it may result in lagging sales tax revenue,” the rating company said.

Jeff Small, a spokesman for the city, didn’t respond to two telephone messages and an e-mail seeking comment on the revised outlook.