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Crestwood defeats Wyoming Area in District 2 Boys Lacrosse semifinals

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<p>WILKES-BARRE &#8212; Standard and Poor&#8217;s has downgraded the City of Wilkes-Barre&#8217;s credit rating three notches and gave the city a &#8220;negative outlook&#8221; because of a poor cash flow and structural imbalance.</p><p>The rating dropped from &#8220;A-&#8221; to &#8220;BBB&#8221; on the city&#8217;s general obligation bonds, S&amp;P Global Ratings said in a news release dated Friday.</p><p>S&amp;P also lowered the rating of the city&#8217;s series 2008C variable-rate demand bonds, which are supported by a PNC Bank letter of credit, to &#8220;A/A-1&#8221; from &#8220;AA/A-1.&#8221;</p><p><ins>&#8220;The lowering of the underlying rating reflects our view of the city&#8217;s weakened general fund budgetary performance and flexibility, which is due to ongoing structural imbalances and limited revenue-raising flexibility,&#8221; S&amp;P Global Ratings credit analyst Moreen Skyers-Gibbs said in the news release.</ins></p><p><ins>&#8220;It also reflects the city&#8217;s constrained and weakened liquidity profile, which has increased its dependency on cash flow borrowing, and that is expected to continue over the two-year outlook period,&#8221; Skyers Gibbs said.</ins></p><p>The negative outlook reflects S&amp;P&#8217;s opinion there is a one-in-three chance the company could lower the rating further within one year should the city&#8217;s cash flow or budgetary flexibility further weaken, the company said.</p><p>&#8220;It also reflects our views of the uncertainty of the city&#8217;s ability to achieve and sustain structurally balanced operations given its limited tax base, weak economy, and growing fixed costs. Although the city has taken steps to obtain some one-time budgetary cuts by restructuring debt, if more sustainable action is not taken, the city&#8217;s fund balance is likely to be depleted in the next several years,&#8221; S&amp;P said in the news release.</p><p>Mayor Tony George wasn&#8217;t surprised by the downgrade, noting the city had a budget deficit when he took office in 2016 and he couldn&#8217;t get council to approve his amended budget that trimmed about $1 million.</p><p>&#8220;They downgraded us, but we&#8217;re still investment-grade&#8221; George said, explaining the new credit rating is high enough that the city can still sell bonds if it needs to borrow. However, it would have to pay a higher interest rate on future borrowing or refinancing.</p><p>George said the city&#8217;s credit rating would have dropped even lower if council had not approved a $52 million debt-restructuring package earlier this month. The refinancing will increase the city&#8217;s $86.2 million debt load by $37 million over the next 21 years. But under the plan, the city&#8217;s annual payments will be much more manageable and allow for greater cash flow for day-to-day operations.</p><p>George said that because of the credit rating downgrade, the city won&#8217;t be able to get as good an interest rate on the debt restructuring as it would have if council had approved the restructuring in January as George had requested.</p><p>As part of its participation in the state&#8217;s Early Intervention Program, the city is working with its financial adviser, The PFM Group, to coordinate a strategy for bargaining with unions, analyze potential deficiencies in its tax collection system and complete an efficiency study of municipal services.</p><p><ins>&#8220;Given the city&#8217;s recent participation in the commonwealth&#8217;s early intervention plan, we believe material financial improvement is possible,&#8221; S&amp;P said. &#8220;However, the inability of the city to implement EIP recommendations, or make significant changes to stabilize operations over the next year, could result in a downgrade. Also, should the fund balance materially weaken or liquidity be further constrained, we could lower the rating.&#8221;</ins></p><p><ins>If the city can stabilize its operations and maintain sufficient liquidity to meet its obligation over the next one to two years, S&amp;P could revise the city&#8217;s outlook from negative back to stable, the company said. &#8220;Although unlikely during the outlook period, if the city is able to improve its liquidity and ultimately its overall financial position over the next two to three years, we could raise the rating.&#8221;</ins></p><style>
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<div class="neCaption">Wilkes-Barre Mayor Tony George looks out a window at City Hall in January. 1/10/2017 Aimee Dilger|Times Leader</div></div><div class="metaInfo"><photo0>https://www.timesleader.com/wp-content/uploads/2017/05/web1_TTL011517George1-cmyk.jpg</photo0><caption0>Wilkes-Barre Mayor Tony George looks out a window at City Hall in January. 1/10/2017 Aimee Dilger|Times Leader</caption0><photoCredit0></photoCredit0></div></div>
<div class="metaInfo"><bylineMeta><p>By Steve Mocarsky</p><p>smocarsky@www.timesleader.com</p></bylineMeta></div><div class="metaInfo"><shirttailMeta><p>Reach Steve Mocarsky at 570-991-6386 or on Twitter @TLSteveMocarsky.</p></shirttailMeta></div>

Wilkes-Barre credit rating downgraded because of poor cash flow