PROVIDENCE – After upping its ratings in 2019, Moody’s Investors Service and S&P Global Ratings held steady in their latest ratings for Providence’s general obligation debt and the Providence Public Building Authority’s lease-revenue bonds, the city announced on Monday.
The latest ratings assigned by the credit agencies last week reflect the city’s stable financial position, Mayor Jorge O. Elorza said.
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“The ratings assigned by Moody’s and S&P are strong indications that we are putting Providence on sound financial footing and are on the right track,” Elorza said in a statement. “By using our stable position to fund historic investments in our roads, facilities and other public infrastructure, we are addressing years of deferred maintenance while strengthening our city from the ground up.”
S&P assigned the city’s debt a BBB+ rating, while Moody’s gave it a Baa1 rating.
In its report, Moody’s described the city’s financial position as “narrow but improving,” noting its increasingly large and unfunded pension and OPEB liabilities, elevated debt burden and above-average poverty level. These challenges are offset, in part, by an expanding and diverse tax base, strong leadership and management, according to Moody’s.
S&P noted that its prior, August 2019 rating upgraded both the city debt and Providence Public Building Authority’s scores as a result of progress in the city’s financial profile. However, the rating agency also highlighted the long-term budgetary pressure from retirement obligations as a challenge.
The $95 million Building Authority bond, intended to help fund the mayor’s $222 million, five-year capital improvement plan, received a Baa2 rating from Moody’s and a BBB rating from S&P.
That the rating for the bonds is lower than the city’s general obligation rating reflects the appropriation requirement, the “essentiality of the projects” and the legal structure, Moody’s wrote.
Reduction in the city’s unfunded pension or debt burden could lead to an upgrade in the city’s ratings, while increasing debt levels and erosion of cash balances could lead to a downgrade, Moody’s wrote.
Nancy Lavin is a PBN staff writer. You may reach her at Lavin@PBN.com. Follower her on Twitter at @NancyKLavin.
