NEW: Moody’s Upgrades Providence’s Outlook from Negative to Stable
Wednesday, September 25, 2013
"The stable outlook reflects the recent progress toward obtaining structural balance including a projected reduction of its negative reserve position and the adoption of a structurally balanced budget in fiscal 2014," said Moody’s in a report published Tuesday.
Additionally, Moody's affirmed Providence's Baa1 general obligation bond rating, which affects roughly $118 million of outstanding debt. The agency also affirmed the Baa2 rating on $361 million lease appropriation revenue bonds issued through the PPBA for school projects through the Rhode Island Health and Education Building Corporation (RIHEBC).
In its report, Moody’s also identified Providence’s major strengths, weaknesses and ways to improve its rating.
- Large tax base anchored by significant not for profit and institutional presence
- Increased PILOT payments from higher education and health care institutions
- Recent cuts to employee health and pension benefits
- Improving unemployment rates
- Negative fund balance position
- Large unfunded pension and OPEB liabilities
- High direct debt burden
- Slow pace of economic recovery
Ways to Improve the Rating
- Improvement of financial flexibility and available reserve levels
- Ability to maintain structurally balanced operating plans
- Significant reduction in unfunded pension and OPEB liabilities
The principal methodology used in the underlying rating was General Obligation Bonds Issued by US Local Governments published in April 2013. An additional methodology used in this rating was The Fundamentals of Credit Analysis for Lease-Backed Municipal Obligations published in December 2011. The principal methodology used in the enhanced rating was State Aid Intercept Programs and Financings: Pre and Post Default published in July 2013.
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