S&P cuts Dunkirk, New York, GOs 3 notches to BBB-minus, rating then withdrawn

S&P Global Ratings lowered Dunkirk, New York’s general obligation bonds by three notches to BBB-minus from A-minus and withdrew the rating.

S&P removed the rating from negative CreditWatch where it had been placed on March 4. The outlook on the credit is negative. The GOs had been secured by the city’s faith-and-credit pledge.

“We lowered the rating due to the city’s imbalanced operations, which have led to a deterioration of its budgetary flexibility with negative available fund balance at fiscal year-end 2021, the last audited fiscal year,” S&P said in a statement.

“In addition, in our view, there are risks related to the city’s financial management policies and practices, which we now consider vulnerable, and its inability to maintain structural balance as highlighted by auditor findings in its fiscal years 2020 and 2021 audit and its inability to produce the fiscal 2022 audit on a timely basis,” S&P said.

“To maintain our ratings in accordance with our applicable criteria and policies, we require additional reliable and timely information from the city, including audited fiscal year-end 2022 financial information,” said S&P credit analyst Felix Winnekens.

S&P said the negative outlook reflects ongoing uncertainty and limited visibility around the city’s budgetary and liquidity position and the potential need for state support to ensure ongoing operations.

“We then withdrew the rating because we have determined we do not have sufficient information to maintain a forward-looking credit opinion on the city, particularly the financial condition of its operations,” S&P said.

S&P noted the environmental, social, and governance credit factors for the change in credit status included risk management, culture and oversight as well as transparency and reporting.

Dunkirk is located 45 miles southwest of Buffalo and is the westernmost city in the state. It’s bordered on the north by Lake Erie and has a population of around 13,000.