Moody’s Investors Service has dropped York, Pa.’s general obligation debt to Ba1, a speculative rating, from Baa3, an investment-grade rating.
The downgrade affects $30 million in debt.
The city has a large accumulated general fund deficit, Moody’s associate analyst Charles Martin and vice president Geordie Thompson wrote Monday. By the end of fiscal 2012 budget this was reduced to 11.5% of revenues.
The city reduced spending by 1.5% in fiscal 2013, primarily by eliminating 11 full time and two part-time positions.
The city’s reliance on cash-flow borrowing is a credit negative, the analysts wrote Monday. It has a moderately-sized tax base with low wealth and income levels. The city’s median family income is 51% of the national median family income.
The city has an elevated debt burden with overall debt at a very high 21% including the city’s share of county and local school district debt, according to Moody’s.
As part of Pennsylvania’s early intervention program, York received a multi-year financial plan in October 2011. “The extent to which the city is able to implement recommended changes and identify additional initiatives to maintain operating balance and eliminate the general fund accumulated deficit will significantly impact the city’s credit going forward,” the analysts wrote.
Moody’s maintains a negative outlook given its analysts belief that the general fund deficit is unlikely to be eliminated in the near term.
York, with about 43,000 residents, is located about 25 miles south of Harrisburg, Pa.
