Given how much debt the City of Portland is piling on these days, it's a wonder that the rating agencies aren't downgrading some of its bonds. But it appears just the opposite is happening. Last week, in response to our inquiry, the city revealed that a $17.5 million bond refinancing deal about to go down tomorrow will do so at an improved rating over the debt that's being paid off.

According to the city debt manager, Eric Johansen, Moody's has rated the new bonds Aa1 -- which is a notch above the Aa2 rating that the original bonds, issued in 1998, received. The "refunding" bonds are of a smaller amount than the original debt, and they have a shorter term -- perhaps those factors explain the rating upgrade. In any event, it will be interesting to see what kind of interest rate the new bonds get. The bonds being paid off bore interest at rates ranging from 4.6 to 5.0 percent. Both sets of I.O.U.'s, original and new, generate tax-exempt interest for the bondholders. Both are backed by the full faith and credit of the city -- namely, its entire taxing power.

Meanwhile, Moody's has signaled that the two major bond insurance companies, MBIA and Ambac, are probably about to get a rating downgrade, which means that the city's longstanding practice of buying an even higher rating -- Aaa -- through insurance has probably been killed off once and for all.