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Allentown's credit rating downgraded to A-3

By Melanie Falcon, Anchor / Reporter, @Melanie_Falcon, MFalcon@wfmz.com
Bo Koltnow, Reporter, BKoltnow@wfmz.com
Published On: Oct 12 2012 05:28:31 AM CDT
Updated On: Oct 12 2012 04:38:31 PM CDT

Allentown's credit rating has been lowered, and one of the big ratings agencies said the outlook remains negative.

ALLENTOWN, Pa. -

Allentown's credit rating has been lowered, and one of the big ratings agencies said the outlook remains negative.

Moody's dropped Allentown's rating on Thursday from an A-2 down to an A-3, which is the lowest of the A ratings.

The reduced rating could make borrowing more expensive and affect more than $120 million of outstanding debt.

Moody's also said the outlook for Allentown remains negative.

"The A-3 rating reflects the city's financial deterioration due to four consecutive operating deficits and reserve appropriations to balance the budget," the agency said in a statement.

Moody's went on to say that Allentown has a history of imbalanced operations, leaving it with little room to be flexible.

The report listed challenges to the city's finances, including a weak socioeconomic profile and limited financial flexibility.

Some strengths cited in the report are that Allentown has a large tax base and recently improved budget assumptions.

One big thing that the report points out is the Neighborhood Improvement Zone, or NIZ,which Moody's lists as something that might be able to help bring the rating back up.

Moody's said it will continue to monitor the city's finances and keep an eye on whether it can start to build its reserves back up.

Allentown Mayor Ed Pawlowski talked exclusively to 69 News at Sunrise on Friday morning and said the city's pension fund is what's killing the city's financial rating.

"Unless we get control of that going forward, we're never going to fix this problem. We're going to see more downgrades in the future," Pawlowski said.  

Pension pain, however, isn't unique to Allentown. Cities across Pennsylvania are feeling the pinch.

At this point, said Pa. Sen. Judy Schwank, D-Berks Co., there isn't much the state can do, but it's an issue on the minds of many in Harrisburg.

"Starting in the next legislative session in January, you will see a number of initiatives," Schwank said. "I think you will see the governor address some. I know the legislature will."

Schwank said she would like to see cities not be tied to state mandates, which she said would free up funds to help offset rising costs.

Pawlowski said his controversial plan of leasing the city's water and sewer systems will fix the city's pension and bump up the bond rating.