Standard and Poor's cut Atlantic City's credit rating three notches on Monday, citing its dissolving tax base and uncertainty over how it will boost fiscal responsibility.
The struggling New Jersey casino hub had its general obligation debt rating lowered to "B" from "BB." The ratings agency kept Atlantic City on credit watch with "negative implications."
"The lack of clear and implementable reforms to restore fiscal solvency without payment deferrals or debt restructuring remains uncertain as the city continues to operate in a difficult fiscal environment," said Timothy Little, an S&P credit analyst, in a statement.
If reforms are not implemented, bankruptcy could potentially become an option for the city, S&P said.
Atlantic City will run an estimated $101 million deficit in fiscal 2015, according to the agency.