Standard & Poor’s on Thursday lowered the outlook on Weslaco’s BBB-plus-rated general obligation debt to negative from stable.
“The negative outlook reflects our view of the city’s reserves, which are low relative to the magnitude of its ongoing structural imbalance,” said analyst Sarah Smaardyk. “We could lower the rating if the city’s financial profile does not improve or deteriorates further.”
The city plans to issue bonds in fiscal 2012 for a new water treatment facility.
S&P downgraded Weslaco’s GO rating in May 2010 to BBB-plus from A-minus, citing deterioration of the city’s financial reserves. Rating factors included a history of uneven financial performance, coupled with a negative fund balance in fiscal 2008, despite substantial support from the utility fund.
In December 2009, Moody’s Investors Service downgraded Weslaco to Baa2 from Baa1, affecting $51.8 million of outstanding GO debt. Fitch Ratings does not rate the city’s GOs.
Located in southeast Hidalgo County near the Mexican border, Weslaco is a regional commercial center midway between McAllen and Harlingen and is nine miles north of the Rio Grande. The population has grown slowly but steadily this decade to 31,000. It is a commercial center in a region with a population of 180,000 within nine square miles.