Standard & Poor's Ratings Services said it has lowered its rating on Luzerne County, Pa.'s general obligation debt two notches to BB-plus from BBB and placed it on CreditWatch with negative implications.
"The downgrade reflects our worsening view of management," said Standard & Poor's credit analyst Timothy Little, "and its political gridlock that we believe has led to uneven cash management."
The CreditWatch reflects continued uncertainty for the remainder of the year as to whether the county will be able to meet its debt service obligations if it does not take action rapidly to resolve its currently serious liquidity condition in light of pending obligations.
"The rating is constrained by our 'very weak' assessment of management conditions based on prior-year structural imbalances and political instability and gridlock weakening the county's financial position and operations," added Little. The county's cash and related financial flexibility have fallen in recent months as it has not received state payments and has not taken action to actively manage liquidity. Most recently, the County Council's decision not to approve a short-term loan to ensure it meets its financial obligations, including debt service for the remainder of the fiscal year, is representative of the challenges for the county. While another vote is planned by the council to secure financing, there are political risks.
Luzerne County, with an estimated population of 320,000, is in the Scranton-Wilkes-Barre-Hazleton metropolitan area in eastern Pennsylvania.
