NEW: Moody’s Downgrades Providence’s Credit Rating
Tuesday, March 27, 2012
Another ratings agency has downgraded Providence's credit rating.
On Monday, Moody's dropped the cash-strapped city's rating one notch, from A3 to Baa1.
"The downgrade to Baa1 from A3 reflects the city's strained financial position with diminishing liquidity and a sizeable budget gap in the current fiscal year," the report stated. "Despite some success in raising additional revenue and reducing expenditures, the city faces a $20 million deficit in fiscal 2012, which ends on June 30. Although it is possible that additional revenue from newly negotiated payments in lieu of taxes (PILOTs) will be secured prior to year-end, the primary strategy for closing the gap is the elimination of cost of living adjustments (COLAs) for retirees, which reduces the city's appropriation to the locally-funded pension system by $16 million but is likely to be challenged in court.The city's cash position is projected to decline to by year-end, and cash flow borrowing is likely to be necessary to finance operations early in fiscal 2013."
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTTwo weeks ago, Fitch Ratings downgraded the city’s credit rating to 'BBB' from "A".
Mayor Angel Taveras is still attempting the plug a $22.5 million deficit for the current fiscal year. Taveras has said bankruptcy is an option if the city does not receive concession from retirees and $7.5 million in additional payments in lieu of taxes from the city's tax-exempt institutions.
