CHICAGO - Standard & Poor's said Thursday that its junk ratings on Wayne County, Mich. will remain unchanged for now despite the state's declaration of a financial emergency.

But the ratings agency said it might downgrade the county if the state appoints an emergency manager.

Gov. Rick Snyder declared the county, home of Detroit, to be in a financial emergency on July 22, one day after a state review team sent him a report with that recommendation.

The state's investigation into Wayne's finances came after county Executive Warren Evans asked the state to step in and declare the emergency. Evans wants to enter into a consent agreement with the state, giving him broader powers to negotiate union contracts, among other things.

The county now has until July 29 to request a hearing to oppose Snyder's declaration, an option it's expected to decline. The county will then have four routes it can take: enter into a consent agreement; request permission to file for bankruptcy; ask for a neutral evaluator; or request the appointment of an emergency manager.

S&P said Snyder's declaration was "not unexpected" and are reflected in its move on June 23 to put the county's BB-plus rating on CreditWatch with negative implications. "Reflected in our CreditWatch placement is the uncertainty surrounding which option the county board will choose," analyst Jane Ridley wrote in its comment.

Ridley said the ratings agency could remove the county's rating from CreditWatch and assign a negative outlook - which would essentially be a positive ratings action - if Wayne retains control over its restructuring.

"However, in our view, the appointment of an EM would not leave as much control with the county staff - and potentially open the possibility for the county to veer off course to regaining structural balance - in which case, we could lower the rating," analyst Jane Ridley wrote in the comment. "Regardless, if the time frame of changes slows markedly, we could lower the rating."


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