Credit rating of Illinois town cut after mayor indicted
CHICAGO Dec 20 (Reuters) - Standard & Poor's Ratings Services downgraded the rating of Bridgeport, Illinois on Thursday after the mayor was recently indicted for diverting city money for his own use.
S&P cut the rating of Bridgeport, a southeastern Illinois town with a population of about 1,800, to BBB-plus from A.
The town is strapped for cash because it has a struggling manufacturing sector, low-income levels and a high debt as a percent of market value, according to the credit ratings agency.
A federal probe that led to the indictment of Mayor Max R. Schauf in November has held up the release of the town's fiscal 2011 and 2012 audits.
Schauf was charged with three counts of mail fraud and one count of obstruction of justice for allegedly submitting false and fraudulent invoices, contracts and bills for services and equipment to the city and pocketing a portion of the money, a statement from the U.S. Attorney's Office for the Southern District of Illinois said.
"The downgrade reflects the city's extremely low cash reserves on a nominal basis and large fluctuations in general fund operations in recent years," S&P analyst Kathryn Clayton said in a statement.
Schauf, who has a trial date in February, pleaded not guilty to the charges on Nov. 8, according to Jim Porter, a first assistant U.S. attorney.
S&P said it could cut Bridgeport's rating again if the audits indicate a deterioration in the town's general fund operations and cash balances.
"City management has conveyed to Standard & Poor's that it does not believe there will be any material effect (as a result of the federal probe) on the financial statements," S&P said.
The town, which has an annual budget of around $275,000, has about $3 million of outstanding debt, according to Clayton.
Earlier this year, the comptroller of another Illinois town, Dixon, was charged with stealing more than $53 million from that city since 1990. Rita A. Crundwell subsequently pleaded guilty in November, according to the U.S. Attorney for the Northern District of Illinois.