Affirmed, But Negative

Fitch Ratings has affirmed Milwaukee County's AA-plus general obligation rating but the agency revised its outlook to negative from stable due to the county's budget struggles.

The rating review came ahead of the county's competitive sale Thursday of $38 million of Build America Bonds and $9.7 million of GO promissory notes. The rating affects $692 million of unlimited tax GO bonds.

"The revision of the outlook to negative from stable reflects the increasing budgetary pressure on the county's historically narrow financial margins," analysts wrote.

A downgrade could result if the county is unable to maintain an already-modest fund balance at current levels and generate balanced operations, or is unable to implement cost-cutting measures and revenue enhancements sufficient to eliminate near- and long-term structural deficits.

The county's strengths include its broad and diversified economic base, which is anchored by significant education and health care components. A weakness is its above-average manufacturing presence, which has dampened overall employment growth.

After four years of operating surpluses, the county recorded a $5.2 million operating deficit last year, bringing its narrow general fund balance down to 4.1% of spending. The county expects to close out the year with a $4.4 million operating deficit, though that may be offset by improving sales tax collections and surplus pension funds.

The 2011 budget calls for a small increase in the property tax levy, elimination of 127 employees, and maintenance of all existing public programs and services at 2010 levels.

County Executive Scott Walker will take over as Wisconsin's governor next month.

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Wisconsin
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