PROVIDENCE – For the second time in four months, the city has received improved ratings from a credit agency, this time from Moody’s Investor Services.
Moody’s report, released March 13, upgraded the city’s issuer rating from “Baa1” to “A3,” calling the city’s financial outlook and current debt burden “stable,” but reflecting “a still limited financial position with modestly improved reserves, a diverse economy anchored by education and health services and government employment as well as below-average resident income and wealth.”
“A3” ratings reflect that the issuer has financial backing, cash reserves, and a low risk of default, according to Moody’s ratings scale.
In November, Fitch Ratings increased the city’s credit rating to “A,” the first since 2011.
Moody’s also upgraded the ratings for both the Providence Public Building Authority and Providence Redevelopment Agency lease-revenue from “Baa2” to “Baa1,” defined as having moderate credit risks.
In a statement Thursday, Mayor Brett P. Smiley vowed a continued improvement to the city’s long-term financial stability.
“I am committed to building a strong financial future for the City of Providence, and [the] bond rating upgrade is another sign that we are on the right path to doing so,” he said.
Moody’s report cited the city’s “sound fiscal management” and an 11-year trend of “pension contributions equal to the actuarial determined contribution reflecting the city’s commitment to addressing its unfunded long-term pension liability.”
However, the report also noted “the very low funded ratio and large size of the unfunded pension liability,” calling it “a significant long-term risk.”
The review was conducted as a part of Moody’s annual surveillance of the city’s finances.
Smiley added his administration “will continue this work in the years to come, making steady contributions to our pension fund while strategically investing in our city’s infrastructure that can improve the quality of life of our residents.”
Providence has approximately $749.9 million in outstanding debt, according to the Moody’s report. The agency listed factors that could lead to future upgrades, including a decline in leverage as a percent of revenue, growth in pension assets and the funded ratio and increases to available reserves as a percent of revenue.
“The stable outlook reflects the city’s diverse economy that is expected to support sufficient revenue raising ability to maintain balanced financial operations and continue the city’s funding commitment to reduce the unfunded long-term liabilities,” they wrote.
Christopher Allen is a PBN staff writer. You may contact him at Allen@PBN.com.
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