EAST PROVIDENCE – In recognition of the city’s improving financial performance, Standard & Poor’s Ratings Services Tuesday raised East Providence’s general obligation bond rating five notches to “A” from “BB+”.
“The higher rating is based on our recently released local general obligation criteria, as well as the city’s improving financial performance and liquidity position and lower long-term pension liabilities,” said Standard & Poor’s credit analyst Victor Medeiros.
“In addition, the city has significantly bolstered financial management controls following the state’s implementation of a budget commission. While the budget commission has since been relieved of its duties, we believe there remains strong active state oversight that will translate into East Providence maintaining stable budgetary performance. We believe its departure will test the city’s ability to manage on its own over the next several years.”
Gov. Lincoln D. Chafee and Department of Revenue Director Rosemary Booth Gallogly appointed the five-member East Providence Budget Commission back in 2011 to help the city achieve fiscal stability. At the time, the city was trying to resolve a growing cumulative school deficit and budget gap. As a result, Moody’s downgraded the city’s bond three notches to below investment grade.
But things are a lot better these days, and the city’s outlook from the bond rating agency is “stable.”
According to Medeiros, the ‘A’ unenhanced rating reflects, among other things, strong financial performance in fiscal 2012 due to significant expenditure cuts and consolidation efforts, and stronger financial management practices.
The rating also reflects an adequate economy with county unemployment still elevated at 11.2 percent as of 2012; adequate budgetary flexibility with 2012 available reserves at 6 percent of general fund and unrestricted school fund expenditures; strong liquidity; adequate debt and contingent liabilities bolstered by the city’s low debt to market value; and a strong institutional framework.
“The stable outlook reflects the city’s focus on rebuilding its operating flexibility and its enhanced financial management controls,” Medeiros said. “We believe East Providence’s improved budgetary outlook is likely to translate into stronger available reserves, particularly as the economy rebounds and new development projects gain traction.”
City Manager Peter Graczykowski announced the city’s enhanced rating at the City Council meeting Tuesday, saying the higher debt rating will save the city money when it goes out to borrow.
“The fact that Standard and Poor’s increased our rating to ‘A’, five levels above the former rating of ‘BB+,’ is a real positive,” Graczykowski said in a press release.
“We are very pleased and proud that the hard work of the East Providence Budget Commission as well as the City Council, School Committee, and city and school management teams has been recognized so soon.
“I would also like to recognize Finance Director Malcolm Moore and Finance Adviser Paul Luba, along with state (Gallogly) and Deputy Director of Revenue Christy Healey, and representatives of FirstSouthwest, our financial adviser, who recently joined me on the rating call with Standard and Poor’s to discuss the city’s progress. Our goal now is to continue to sustain balanced operating results after the departure of the Budget Commission,” Graczykowski said.
In the same press release, Mayor James Briden said: “The City of East Providence now has an investment grade credit rating. This is a great day for our city and our taxpayers. This should create significant savings in future borrowing costs for the city.”