ATLANTA -- Standard & Poor's Corp. this week changed its outlook on eight South Carolina issuers to negative from stable, citing a Defense Department commission's proposal for shutting down naval facilities in the Charleston area.
"We are putting on the negative outlooks because there is a reasonable likelihood that the base closures will come about, which would hurt the economy of the area," Jeffrey Panger, an associate at Standard & Poor's, said yesterday.
The rating action comes two months after the Department of Defense recommended that 31 million bases nationwide be closed. The department's list includes four naval facilities adjacent to Charleston.
On March 25, Standard & Poor's changed its outlook on Charleston to negative from stable, citing the prospect of the base closings. Charleston has $56.2 million of general obligation debt rated AA.
Panger said Standard & Poor's is reviewing the whole Charleston area as part of an effort to assess how localities across the country will be hit by the proposed base closings. The rating agency looked at South Carolina first because the threatened bases account for an unusually large part of the economy there, he said.
The issuers for which Standard & Poor's changed its outlook this week are: North Charleston, which has $22.1 million of GO debt rated AA-minus; Charleston County, with $54.4 million of GOs rated AA; Charleston County Park & Recreation District, with $28.5 million of debt at AA minus; Charleston County Airport District, with $12.82 million of GOs at AA; Dorchester County School District No. 2, with $4.7 million of GOs at A-plus' Mount Pleasant, with $5.8 million of debt at AA minus; the North Charleston Sewer District with $24.4 million debt rated AA; and the city of Hanahan, with $872,000 of GO debt rated A-minus.
Panger said that North Charleston, where the installation re located, would be the most severely affected.
"Other area credits are expected to experience lesser though still significant economic dislocation, including increased unemployment, population loss, reduced economic activity and property values, declining tax revenue, and financial strain." according to an Standard & Poor's report that details the outlook changes.
Closure of the Charleston-area installations could result in a direct job loss of 19,000 civilians and service personnel working at the naval facilities, according to Standard & Poor's. The rating agency said the closings' indirect impact could raise the total of 66,000 lost jobs, or 26% of the area labor force.
But Panger said that within the last week one Charleston-area credit. Berkeley County, has actually been upgraded to positive from stable. The county's $18.3 million of GOs are rated A-minus
Berkeley County's financial position has improved, he has said, because of its strong financial position, is low debt levels, and the economic growth it has enjoyed while rebuilding after Hurricane Hugo struck in 1989.
Panger said that if the base closings do not occur, Berkeley County could be upgraded. On the other hand, if the base closings do occur, he said, the positive outlook could be removed.
The Defense Department's recommendations must now be approved by the Base Closure and Realignment Commission, which Congress, created in 1990. The commission will submit its final recommendation on military base closings to President Clinton on July 1. Clinton has until Sept. 1 to 10 approve the plan. Finally, Congress must approve any recommendations submitted by the President.
As currently recommended, the closures will take place over a two- to seven-year period and could eliminate over 57,000 civilian job and 24,00 military jobs nationwide.
Moody's Investors Service has not taken any actions in connection with the proposed base closings in South Carolina
Fitch Investors Service does not rate any issuers in the Charleston area.