CHICAGO — Wayne County, Mich., which has its seat in Detroit, was hit Thursday with its third downgrade from a major ratings agency in three months as Standard & Poor's Thursday dropped the county's rating to the lowest-investment grade level.

S&P said the downgrade of Wayne County's GO debt to BBB-minus from BBB is due to the county's chronic failure to achieve structural balance as well as the rating firm's own revised general obligation bond criteria.

The outlook is stable.

The action comes as the county prepares to issue limited-tax GO delinquent tax notes, rated SP-1 by Standard & Poor's.

It's the third downgrade for the struggling county since August.

Fitch Ratings in August pushed Wayne into junk territory with a five-notch downgrade that warned of a rapidly deteriorating fiscal situation. Moody's Investors Service also downgraded the county in August, dropping it to Baa3, one step above junk territory. Fitch and Moody's both have negative outlooks on the credit.

It's the county's second downgrade from S&P since May, when the ratings firm lowered its rating to BBB from BBB-plus.

In both downgrades, S&P cited the county's difficulty in achieving structural balance, among other factors.

"The BBB-minus rating on the county's GO limited- and unlimited-tax [general obligation] bonds is based in large part on Wayne County's chronic structural imbalance and persistent negative unreserved general fund balance; these two circumstances have led to pressures on the management score that result in a rating cap of BBB-minus," S&P said in Thursday's release on the downgrade.

Other problems include weak management due to the apparent inability to make enough cuts to achieve balance as well as what analysts called a "very weak economy, as evidenced by low market value per capita and projected effective buying income."

On the plus side, Wayne has strong liquidity and a strong debt profile with rapid amortization, analysts said.

"The stable outlook reflects Standard & Poor's expectation that Wayne County will continue to work toward regaining structural balance and that its progress will be observable over the two-year time horizon of the outlook," the report said. "An improvement to the rating over the two-year horizon of the outlook could be based on evidence of meaningful changes to the operations of the county ... and demonstrated progress toward reducing the accumulated general fund deficit."

Wayne has $196 million of limited-tax GO bonds outstanding and roughly $270 million of Wayne County Building Authority bonds outstanding.


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