Standard & Poor's Ratings Services said it lowered its underlying rating to BBB-minus from A on the Atwater Public Financing Authority, Calif.'s wastewater revenue bonds, issued for Atwater, and placed the rating on CreditWatch with negative implications.

"The rating action reflects our view that financial distress in the city's general fund, water fund, and sanitation fund has negatively affected the credit quality of the wastewater enterprise through the drawdown of the city's pooled cash reserves," said Standard & Poor's credit analyst Scott Sagen.

"The CreditWatch action reflects our view of the city's consideration of declaring a fiscal emergency, which, under California Assembly Bill 506, allows for a Chapter 9 bankruptcy filing under the U.S. Bankruptcy Code without a neutral evaluation process," Sagen added.

City staff recommended declaring a fiscal emergency at a special meeting on Sept. 19. The council will continue the public hearing related to the determination at a meeting on Oct. 3.

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