For the second time in two weeks, a Pennsylvania county has received a multi-notch downgrade from a major bond rating agency.
Standard & Poor’s on Tuesday lowered the general obligation rating for Northumberland County two notches to BBB-plus from A, with a negative outlook. S&P cited “sustained structural deficits” that could result in a substantive negative unreserved general fund balance at the end of fiscal 2011.
The move affects roughly $19 million in debt that Standard & Poor’s rates. The county’s total outstanding general obligation debt is $29.9 million.
The agency also said it worries about Northumberland’s commitment to credit quality, given its reduction of the fiscal 2010 property tax levy to 18.4 mills from 21.7 mills while facing fiscal imbalances.
Northumberland, whose county seat is Sunbury, sits north of Dauphin County, home to capital city Harrisburg, which filed for Chapter 9 bankruptcy protection late Tuesday night. Messages seeking comment were left with Frank Sawicki, chairman of Northumberland’s Board of Commissioners.
“We believe that while the county’s sale of its nursing home helped improve reserves for fiscal 2010, structural imbalances have persisted due primarily to revenue shortfalls,” said S&P credit analyst Timothy Barrett. He added that the agency would reconsider the outlook if the county can achieve structural balance in its general fund and maintain what the raters considers adequate reserves.
On Sept. 27, Moody’s Investors Service lowered the rating of Lackawanna County, home to Scranton, five notches to a speculative-grade Ba3 from Baa1. Moody’s said at the time the rating remains under review for downgrade or withdrawal.