Credit rating service Moody’s downgraded New Haven’s bond rating on Monday, affecting about $510 million of current outstanding debt.

The report cited the Elm City’s “sizeable” 2012 deficit and an “expected deficit in fiscal 2013” and said New Haven may face further credit weakening if it fails to rein in its debt. Monday’s announcement moves the the bonds’ credit rating down from A1 to A2. Out of its 10 investment grade bond ratings, A1 and A2 are fifth and sixth highest, respectively. Below those 10 ratings are speculative grade, or “junk” bond ratings.

Other weaknesses mentioned in the report include the deficit in the city’s Internal Service Fund, which helps the city account for self-insurance, and high future fixed costs such as pension contributions.

“Moody’s decision to downgrade the City’s debt is a clear result of the systematic mismanagement of our municipal finances — taking on immense amounts of debt, failing to adequately fund our pension, healthcare and insurance liabilities, and running our fund balance to dangerous lows,” Ward 10 Alderman and mayoral candidate Justin Elicker FES ’10 SOM ’10 said in a press release. He also argued that raising taxes and selling city assets are untenable long-term solutions.

Monday’s event follows Fitch’s similar downgrading of New Haven bonds in late April, from an A+ to A rating. Both rating agencies gave New Haven a “negative” outlook.