Jan 8 Standard & Poor's Ratings Service said on Tuesday it removed from CreditWatch with negative implications California's Atwater Public Financing Authority wastewater revenue bonds, because it believes the city is no longer considering declaring a fiscal emergency that could have led to a Chapter 9 bankruptcy.
Still, the agency affirmed the BB-plus rating on the authority's wastewater revenue bond rating with a negative outlook, citing the central California town's budget struggles.
"The negative rating outlook reflects our opinion that Atwater will find it difficult to turn around its financial condition based on the city's Oct. 3, 2012, declaration of a state of fiscal emergency under case law," said S&P credit analyst Scott Sagen.
According to S&P "nearly every major operating fund" in Atwater has a structural deficit and those funds rely on the wastewater system for working capital. The agency expects large rate increases for water and sanitation in the near future to help close budget gaps that could total up to $600,000 for those funds.
Meanwhile, it expects the general, water and sanitation funds to tap pooled cash reserves, leaving less money to pay for wastewater debt.