KBRA Affirms BBB+ Rating for Borough of Upland, PA - G.O and Revises Outlook to Negative
20 Dec 2024 | New York
KBRA affirms the long-term rating of BBB+ and revises the Outlook to Negative from Stable for the Borough of Upland, PA General Obligation Notes.
The revision of the Outlook to Negative for the Borough of Upland’s (the “Borough”) General Obligation Notes reflects deteriorating liquidity and General Fund balance, driven by operating deficits in four of the last six fiscal years despite considerable federal pandemic stimulus funding, and lack of timely financial disclosure in each of the last two years. In addition, the Negative Outlook reflects KBRA’s increasing concern that the stability of the Borough’s tax base and key revenue sources may be impacted by the full or partial closure of Crozer-Chester Medical Center, the Borough’s largest employer, which has struggled financially in recent years.
Key Credit Considerations
The rating was affirmed because of the following key credit considerations:
Credit Positives
- Well-funded pensions and affordable fixed costs burden.
Credit Challenges
- Realization of General Fund operating deficits in four of the last six fiscal years resulting in a significant decline in reserves and liquidity.
- Low resident income and wealth levels coupled with high poverty rate when compared to the Commonwealth.
- Dependence of revenue base on earned income taxes, which are economically sensitive.
Rating Sensitivities
For Upgrade
- Reversal of negative operating trends and rebuilding of reserve balances.
- Reduced dependence on volatile earned income tax receipts.
- Adoption and implementation of formal policies for maintenance of general fund reserve levels.
For Downgrade
- Continuing trend of structural imbalance in operations causing further deterioration in reserve balances.
- Ongoing use of one-time revenue solutions to achieve structural balance.
- Impairment of tax base driven by a restructuring or cessation of operations at the Center.
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