CHICAGO -- Moody's Investors Service dropped Steele County, Minn.'s general obligation rating four notches citing the strain of enterprise systems and a senior living facility on its balance sheet.
The rating fell June 2 to A3 from Aa2 on the county's general obligation bonds and to Baa2 from A2 on its healthcare crossover revenue debt. Moody's assigned a negative outlook. The action impacts a total of $14.9 million in rated debt.
The downgrade to A3 "reflects the county's enterprise and contingent liability risk associated with continued advances to component units and its partnership in a nonprofit senior care facility," Moody's said. "The A3 rating also takes into consideration the county's healthy fund balance and manageable debt burden."
The Baa2 reflects the county's lease agreement to maintain the facilities' operations to the extent necessary in the event there is a deficiency in revenues. Debt service on the revenue bonds is secured by a gross revenue pledge of the county's Cedarview and Park Place healthcare facilities and backed by a county pledge to appropriate from its general resources adequate revenues to support the facilities' operations.
The negative outlook stems from analysts' concerns over the continued risk associated with the county's support of Steele County Communities For A Lifetime, Inc., a nonprofit corporation formed by the county and Benedictine Health System.
SCCL's ongoing structural imbalance and recent default on unrelated debt may place additional pressure on the county as it looks to its corporate members for liquidity and operational support.
Moody's put the ratings on review in March following a notice filed by SCCL that it would be unable to cover a scheduled monthly debt payment. The county's other strains stem from advances to its Civic Center Enterprise Fund for cash flow purposes related to ice rink operations that have not been self-supporting.
The county could win an upgrade if it experiences improved financial operations in its Civic Center fund and/or nonprofit corporation while it could face a downgrade further advances are made to its component units and outside ventures that pressure its liquidity.
Steele County is in the southwestern portion of Minnesota, about 60 miles south of Minneapolis, with a population of 36,500.
