Wilkes-Barre removed from S&P credit watch negative
Wilkes-Barre, Pennsylvania, received positive news late Wednesday when S&P Global Ratings removed its BBB-minus rating on the city from credit watch with negative implications.
S&P, which red-flagged the Luzerne County city on July 6, affirmed its long-term and underlying ratings on the city's general obligation bonds. The outlook is negative.
Its A/A-minus-1 rating on Wilkes-Barre’s Series 2008C variable-rate demand bonds, which a PNC Bank letter of credit facility supports, remains unchanged.
Although Wilkes-Barre requested distressed status under Pennsylvania’s Act 47 workout program and the state Department of Community and Economic Development rejected it, its financial position had not worsened and the rejection presents no immediate pressure to the city's overall credit quality, said S&P analyst Moreen Skyers-Gibbs.
S&P said the city having adopted some recommendations of a five-year plan stemming from the commonwealth's early intervention program has benefited Wilkes-Barre’s year-to-date operations and cash-flow projections.
"Nonetheless, operations remain structurally imbalanced and the city continues to face budgetary challenges," said Skyers-Gibbs.
A pledge of the city's full faith, credit, and taxing power, including unlimited ad valorem property taxes, secures the GO bonds and notes.
According to Skyers-Gibbs, the negative outlook reflects a one-in-three-chance that S&P could lower its rating within a year “if officials fail to implement and execute structural reforms.”
Mayor Tony George has projected a $3.5 million shortfall for fiscal 2019. According to a DCED overview, the cumulative gap could spike to $16 million by 2021.
“Clearly we are not in an enviable position,” George said at a DCED hearing at City Hall on Aug. 1.
The city’s approved fiscal 2018 budget totaled $49.5 million.
More broadly, 40,600-population Wilkes-Barre’s struggles reflect those of northeast Pennsylvania’s declining coal region. The city has an aging population. Its population was estimated in 2017 at 40,066, down by 3% since the 2010 census.
Statewide, 44 of Pennsylvania’s cities, or 77.2%, have declined in population since 2010, said the Wilkes-Barre-based Pennsylvania Economy League, which cited U.S. Census Bureau data.