BREAKING NEWS: Providence Drops Two Places in Moody’s Ratings
Thursday, March 17, 2011
Nationally influential Moody’s Investor Services downgraded Providence’s general obligation bond rating two places, from A1 to A3, on Wednesday, adding, “The outlook is negative.”
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David Ortiz, spokesman for Mayor Angel Tavares, said “Moody’s downgrade of the City’s General Obligation rating from A1 to A3 is not totally unexpected, given Providence’s current financial condition and a projected $110 million structural budget deficit for FY12. Despite the downgrade, Providence still has an investment-grade rating.”
Moody’s cited the key contributing factors as being the city's weakened financial position, deficit borrowing to meet expenditure needs and shaky structural balance. Moody’s explained “The rating also incorporates the city's tax base which, while benefiting from a significant institutional presence, remains pressured by above average unemployment and low income levels. The city's debt levels are above average and its pension system remains significantly underfunded. “
The investment service listed Providence’s strengths “state capital, employment base anchored by relatively stable government and not for profit workforce.” But Moody’s also noted that they did face hurdles in achieving structurally balanced operation operations without the need for additional deficit financing; sustaining adequate cash flow in the face of expenditure needs, and the challenge of given ongoing expenditure continuing revenue unpredictability.
The Full Statement From the Mayor's Office:
“In its report, Moody’s acknowledged the initial actions Mayor Angel Taveras has taken in his first 60 days in office to address the City’s financial condition,” Ortiz said. “Mayor Taveras will continue to make the tough decisions needed to stabilize the City’s finances.”
In the coming weeks, the Taveras administration intends to close an existing $28 million budget shortfall and will seek to submit a balanced FY12 budget to the City Council.
Moving forward, the Taveras administration will do whatever is needed to create structurally balanced operations, improve the City’s operating reserves, and make full annual required contributions to the City’s retirement system. Such actions will put Providence in position to restore its rating.”
