Standard & Poor's Ratings Services said it lowered its rating on Winsted, Minn.'s outstanding, general obligation-backed debt to A from A-plus.
The outlook is stable.
"The downgrade reflects the city's increasing economic concentration and high overall debt burden," said Standard & Poor's credit analyst Blake Yocom, "while the A rating reflects our view of the city's adequate management and budgetary performance."
Other factors include its: very weak economy, with a concentrated employment and tax base; very strong budgetary flexibility, with an available fund balance in fiscal 2014 at 59% of operating expenditures; very strong liquidity, with total government available cash at 137.8% of total governmental fund expenditures and 4.4x governmental debt service, as well as access to external liquidity the rating agency considers strong; very weak debt and contingent liability position, with debt service carrying charges at 31.6% of expenditures and net direct debt at 217.3% of total governmental fund revenue, as well as high overall net debt at greater than 10% of market value; and adequate institutional framework score.
Winsted, with an estimated population of 2,364, is in McLeod County.
"The stable outlook on the rating reflects our expectation that Winsted will maintain very strong budgetary flexibility and liquidity," added Yocom. Consequently, the rating agency does not expect the rating to change over the two-year outlook horizon.
If the city were to significantly reduce its debt burden and if the local economy were to become more diversified, it could consider raising the rating. It could lower the rating if the city's budgetary performance and other financial measures were to deteriorate substantially, although it does not view this as likely over the next two years.
