Standard & Poor's Ratings Services said its general obligation rating on Wayne Charter County, Mich., is unchanged following the declaration of financial emergency.
On July 22, Michigan Gov. Rick Snyder formally declared a financial emergency in the county, one day after the state review team he appointed recommended this action.
These steps were not unexpected, and are reflected in the June 23 CreditWatch, where S&P had placed the BB-plus limited tax GO rating with negative implications given the expectation of this chain of events.
Following the declaration, the Wayne County board can choose one of four possible outcomes: (1) a consent agreement; (2) an emergency manager (EM); (3) a neutral evaluation; or (4) a move to file for Chapter 9 bankruptcy.
Reflected in the CreditWatch placement is the uncertainty surrounding which option the county board will choose. If it chooses an EM, the autonomy given to that role would allow an EM to change the current trajectory of the county's reform. That reform--including the maintenance of a rapid pace of change--is critical to the county's long-term financial health, as well as the GO rating.
S&P could remove the rating from CreditWatch and assign a negative outlook should the county retain control over its restructuring, such as via a consent agreement. However, the appointment of an EM would not leave as much control with the county staff--and potentially could open the possibility for the county to veer off course to regaining structural balance--in which case, it could lower the rating. Regardless, if the time frame of changes slows markedly, it could lower the rating.
As the process continues, Standard & Poor's will be looking for clarity on the county's next steps and their impact on Wayne County's existing transformation plan as well as any timeline changes. Standard & Poor's will continue to follow the situation closely.
