NEW: Providence’s Credit Rating Downgraded Three Notches
Wednesday, March 14, 2012
Fitch Ratings today downgraded Providence's credit rating by three notches as a result of the capital city's deteriorating fiscal condition.
The city was downgraded to 'BBB' from "A".
"The three-notch downgrade and Negative Outlook are a result of the continued decline in the city's financial flexibility over the last 12 months, leaving the city in a weak liquidity position," the report notes. "This risk is compounded by Fitch's concern about the city's ability to address future-year structural deficits."
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTThe report credited the Taveras administration for eliminating the majority of Providence's $110 million structural deficit, but the city still faces a $22.5 million shortfall for the current fiscal year.
Mayor Taveras has warned that bankruptcy is a potential option if the city can't freeze cost-of-living-adjustments for retirees and obtain $7.1 million in additional payments in lieu of taxes from the city's tax-exempt institutions.
"Fitch has concerns about the city's ability to generate adequate cash flow to fully support current-year operations and the medium-term challenge of successfully closing future fiscal years' large structural budget gaps," the report states. "Challenges include statutory revenue limitations, a shortage of additional cost-cutting solutions, and the city's ability to alter commitments related to retirees' benefits payments."
