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WILKES-BARRE — The city’s credit rating could take another hit as a result of Mayor Tony George asking the state to declare Wilkes-Barre a distressed municipality.
Standard & Poor’s placed the city’s “BBB-” rating on CreditWatch with negative implications, S&P Global Ratings credit analyst Moreen Skyers-Gibbs said in a July 6 press release.
The statement followed the mayor’s petition to the Pennsylvania Department of Community and Economic Development on June 28 for an Act 47 declaration.
The mayor has said the city faces an estimated $3.5 million deficit next year and in the coming years despite efforts to place Wilkes-Barre on sound financial footing with its participation in the state’s Early Intervention Program.
S&P said it will gather more information before making a determination that could make it more expensive for the city to borrow money at higher interest rates.
“We expect to resolve the CreditWatch status within 30 days. We could lower the rating if we believe that the city’s credit quality is no longer commensurate with the rating. However, if we believe it does remain commensurate with the current rating, we could affirm the rating and remove it from CreditWatch,” the release said.
If S&P does downgrade the city’s credit rating, it would be the second time during George’s administration. In May 2017, S&P lowered the rating to “BBB-” from “A-” because the city’s cash flow was constrained and was relying on borrowing to make ends meet. At the time, S&P noted it believed the city could turn things around through the EIP. But it also warned of a downgrade if the opposite happened.
The recent notification did not come out of the blue, given the latest development, city Administrator Ted Wampole said.
“It was not unexpected,” Wampole acknowledged Thursday.
Any time there is a significant event like the city seeking help under Act 47, “I believe it warrants some questions from the financial world and we’re not afraid of that,” Wampole said.
“We think we are at the early stage of it, not that we’re worried about paying the bills tomorrow.”
City officials are tentatively scheduled to hold a conference call with S&P on Aug. 7 and by then the state is expected to have made its decision on declaring the city distressed.