What happens when Wall Street thinks towns are going broke?

Birmingham (Jefferson County), Ala. went bankrupt and threatened to stiff bondholders; Pennsylvania Gov. Tom Corbett seized control of Harrisburg to keep it from doing the same; Michigan may do as much to  Detroit; and Collingswood Mayor Jim Maley is waging a YouTube campaign to complain Moody's six-notch downgrade was unfair.
But rich towns less dependent on borrowed money can afford to take credit ratings more in stride, as I wrote in Sunday's Philadelphia Inquirer column: 
"Last week, Moody's turned its big gun on pleasant Newtown Township, Bucks County, population almost 20,000, median family income $92,000, almost double the state average.
"The agency issued a rare two-notch cut in Newtown's credit rating on nearly $10 million in outstanding township bonds, to Aa1, citing falling tax revenues and a "deterioration" in the township's cash reserve - to $1 million, from $3 million in 2008.
"Newtown has cut spending, laying off five workers, but not fast enough to make up for a drop in tax revenues. Unlike many suburbs, which rely on real estate taxes, more than half of Newtown's budget is financed from wage taxes. Layoffs at military contractor Lockheed Martin and the shutting of ICT Group Inc.'s call center have cut revenue from wage taxes by 6 percent in two years, Moody's analyst Kristina Piccarretto noted in her report.
"What to do? The Republican majority on Newtown's divided Board of Supervisors had asked police and fire unions for a wage freeze. The workers said no.
"The Democratic members suggested a tax hike (Newtown's property tax is low, by suburban standards). The majority refused.
"Robert L. Ciervo, head of the Board of Supervisors, figured Newtown still had a million dollars in cash, a 10 percent cushion for its annual budget. State guidelines called for at least 5 percent. He figures that should be evidence enough of Newtown's solvency.
"But Moody's doesn't just look at absolute debt. It also tracked the trend of the surplus, falling from $3 million to $1 million in two years. Relatively, that looks bad. So Moody's cut.
"The township's reaction? Big deal... Ciervo rejected the suggestion Newtown was "living beyond its means." That "would signify spending has increased dramatically," which it hasn't, he told me.
"But revenues are falling a lot faster than spending, I noted. Doesn't that amount to the same thing? Doesn't matter, Ciervo said, because "I don't see us [borrowing] money, probably, in the next 10, 15 years...
"Why not boost taxes, just to be prudent? "Our residents are not getting raises. They've been losing their jobs," Ciervo said.
Conclusion: "If you don't need to borrow, the debt machine can't crush you."