KBRA Downgrades Borough of Upland, PA General Obligation Notes to BB; Outlook Remains Negative
16 Dec 2025 | New York
KBRA downgrades the long-term rating on the Borough of Upland, PA (the Borough) General Obligation Notes to BB from BBB+. The Outlook remains Negative.
The downgrade reflects sharp deterioration in the Borough's tax base following the May 2025 closure of the Crozer-Chester Medical Center (the Medical Center) which was historically the Borough’s dominant taxpayer. To stabilize finances for the current 2025 and subsequent 2026 fiscal years (FYE December 31), the Borough has relied on proceeds of a $1.8 million loan rather than structural budget solutions. The loan closed on December 1, 2025 and is collateralized by assets of its rental housing enterprise known as Auburn Village.
A non-investment grade rating is underpinned by the Borough’s multi-year trend of tightened General Fund (GF) liquidity and negative GF balance as a result of revenue underperformance driven by the Medical Center’s downsizing through FYE 2024 and closure in FY 2025; less robust financial management and planning infrastructure commensurate with the Borough’s relatively small size; and, moderate debt and continuing obligations profile. Somewhat offsetting the aforementioned concerns is the Borough’s statutory authority to reduce its historic reliance on earned income taxes in favor of property taxes, which could help stabilize operations.
The Negative Outlook reflects substantial uncertainty with respect to how the Borough will fund operations beyond FY 2026 given planned depletion of the $1.8 million in loan proceeds, uncertain prospects for the successful renovation and reopening of the Medical Center, and the absence of an articulated specific plan from Borough management addressing the budget adjustments that would be necessary to restore structural budget balance should the Medical Center not reopen.
Key Credit Considerations
The rating was downgraded because of the following key credit considerations:
Credit Positives
- Borough has statutory authority to shift the revenue structure away from earned income taxes toward property taxes, which would help to partially stabilize the budget in the absence of the Medical Center reopening.
- Well-funded pensions and moderate fixed costs burden.
- Loan leveraged against non-core housing assets shores up liquidity and operations through FY 2026.
Credit Challenges
- Medical Center closure in May 2025 substantially reduces the tax base and creates a large structural imbalance.
- Near term, significant reliance on loan proceeds rather than more permanent budgetary adjustments.
- Weak socioeconomic characteristics may constrain the Borough’s ability to raise taxes to eliminate deficits.
Rating Sensitivities
For Upgrade
- Borough management’s articulation of a detailed plan to restore structurally balanced operations with or without the Medical Center’s reopening.
- Replenished reserves and improved liquidity.
For Downgrade
- Borough seeks Chapter 9 bankruptcy protection or enters Act 47 State supervision signaling a lack of willingness or ability to address financial challenges.
- Continued reliance on loans and other non-recurring revenue sources to support operations beyond FY 2026.
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