NEW YORK - Standard & Poor's Ratings Services said it has placed its AA long-term rating and underlying rating (SPUR) on Suffolk County, N.Y.'s general obligation (GO) debt on CreditWatch with negative implications. The outlook had been negative since May 2011.
The CreditWatch placement reflects Standard & Poor's view of new information provided by the county that indicates a deteriorating liquidity position and a worse-than-expected financial position going into 2012.
The CreditWatch placement indicates that there is a one in two chance that Standard & Poor's could lower the county's rating one or more notches in the next 90 days. Based on the county's actions to address its current financial position, structural imbalance, and deteriorating liquidity Standard & Poor's anticipates one of three potential rating outcomes:
--Swift county action that immediately addresses its deteriorating liquidity position and fully addresses the structural imbalance could lead to a rating affirmation with maintenance of a negative outlook reflecting implementation risk.
--A credible plan that makes adjustments to partially address liquidity and structural imbalance in the short term with other actions focused on longer term budget solutions could lead to a one-notch downgrade; or
--Lack of a credible plan to address liquidity pressure and current and future-year structural imbalances in a timely manner could lead to a downgrade into the A category;
"We understand that the County Executive, as the county's Chief Budget Officer has declared a state of fiscal emergency and that this declaration provides extraordinary powers that include a funds embargo, quarterly budget allotments, and reductions to non-salary departmental appropriations. While this type of action is rare, in our opinion, for credits at this rating level, we believe that it could enhance the county's ability to swiftly implement adjustments to its fiscal situation," said Standard & Poor's credit analyst Lindsay Wilhelm. "We expect to take rating action within the next 90 days, after we receive the necessary information to establish the county's current and projected financial position."