PROVIDENCE – The city has hit an 11-year high in financial stability, according to Fitch Ratings.
The agency recently upgraded the city’s two outstanding general obligation bonds from “A-” to “A,” the first time the city has achieved that grade since 2011, according to a statement from the city. At the same time, Fitch gave the city a better grade on its credit risk, raising its issuer default rating from “BBB” to “BBB+.”
In explaining the higher ratings, Fitch cited the city’s “improved financial resilience,” including operating surpluses for six consecutive budget years, and its “independent revenue raising ability.”
Fitch also highlighted examples of good financial management to restore the city’s reserves, including increasing the property tax levy, fully funding actuarial pension contributions, and implementing more-conservative pension rate of return assumptions. A growing tax base and federal stimulus money also helped boost the city’s financial standing.
Fitch offered a stable rating outlook, but also pointed to weakness in the city’s demographics, with a large student population and higher-than-average unemployment contributing to lower wealth levels.
The city’s plan to borrow $500 million through a pension obligation bond – currently on hold due to high interest rates – is seen as having a “neutral to negative impact” depending on the returns the city realizes from the bond proceeds, Fitch said.
“This rating upgrade reflects our success in tackling the city’s fiscal challenges head on,” Mayor Jorge O. Elorza said in a statement. “While we’re not completely out of the woods yet, our finances are in the best shape they’ve been in in a very long time. I am proud that Fitch has recognized the hard work of our team and has upgraded our rating once again.”
Nancy Lavin is a PBN staff writer. You may reach her at Lavin@PBN.com.
