Fitch maintains Pawtucket’s bond rating

FITCH RATINGS AFFIRMED Pawtucket's general obligation bonds at BBB+, and also is maintaining a stable outlook.  / COURTESY CITY OF PAWTUCKET
FITCH RATINGS AFFIRMED Pawtucket's general obligation bonds at BBB+, and also is maintaining a stable outlook. / COURTESY CITY OF PAWTUCKET

PAWTUCKET – Fitch Ratings has affirmed its ratings on Pawtucket’s general obligation bonds at BBB+, and is maintaining a stable outlook.
Fitch upgraded the $2.9 million in series 2005 bonds last year from a rating of BBB-.
In its latest report explaining the reason for its rating, Fitch said that management has achieved financial stability in its general and school funds after experiencing operational pressures from 2008 to 2011. It also noted that management eliminated its accumulated school fund deficit balances two years ahead of expectations and rebuilt reserves in its general fund to more solid levels.
However, it said the city’s unfunded pension and other post-employment benefit liabilities are “very high” and “costs are growing.” It noted that the city has been making full pension annual required contributions after a period during which they were underfunded. Pension reforms have helped the city control growth in the annual required contributions, Fitch said.
Fitch said the city’s debt levels are expected to remain low.
But it mentioned that wealth levels among residents are relatively low, and that the city’s jobless rate is higher than the state rate. It was 6.6 percent in August, compared with the statewide rate of 5.7 percent.
Fitch said that the stable rating “is sensitive to shifts in fundamental credit characteristics including the city’s ability to manage increasing retiree benefit costs while maintaining adequate reserve levels. The stable outlook reflects Fitch’s expectation that such shifts are unlikely.”
Fitch noted that the city’s fiscal 2014 results showed a $4.8 million surplus, representing the third year of operational surpluses. Revenue also exceeded the budgeted amount by $2.5 million as current and overdue tax collections were higher than expected. Savings also were realized from a lag in filling open positions, proceeds from a SAFER grant offsetting fire pension costs and unemployment insurance savings.
“Fitch expects management will continue its prudent management of city and school finances in the long term now that liquidity and budget stability have been restored. In addition, the phase-in of increased state funding for schools and other cost-savings measures should continue to help stabilize school operations,” the report said.
Home prices increased 3.9 percent year over year in September. The report also mentioned that a number of commercial expansions and restorations of previously vacant properties that have happened, or are in the works, are expected by management to support future tax base growth.

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