Ratings and Lower Interest Rate Environment Open Opportunity for Economic Savings
December 7, 2020
PROVIDENCE, RI – Mayor Jorge O. Elorza today announced that Fitch Ratings and S&P Global have completed their reviews of the City of Providence and have affirmed the City’s ‘A-’ and ‘BBB+’ ratings, respectively, on the City’s outstanding General Obligation (GO) Bonds.
“These ratings reaffirm we are on the right path to building a better, brighter future for Providence,” said Mayor Jorge O. Elorza. “Since taking office six years ago, my Administration has stopped kicking our long-term financial problems down the road and made one-time solution budgeting practices a thing of the past. During uncertain financial times, continuing these practices will ensure a city that works for generations of residents to come.”
The City’s recent revenue growth and expenditure controls have contributed to surplus results over the last three fiscal years and the elimination of Providence’s negative general fund balance earlier than planned. Both the S&P and Fitch reports highlight the City’s successful efforts to manage expenses in line with natural revenue growth over time, but cite elevated long-term retiree costs to expected to remain a burden on the budget. Fitch and S&P also discuss the impact of the COVID-19 pandemic on the City; the City’s expectation of adopting a balanced budget without using reserves once the State budget is passed; and the City’s management of cash, which has remained steady.
Fitch Ratings’ review was conducted in connection with their regular surveillance of the City’s credit. In addition to the GO Bond Rating, Fitch has affirmed Providence’s Issuer Default Rating (IDR) at ‘BBB’. According to Fitch, the GO bond rating is two steps above the IDR, which reflects the enhanced recovery prospects for GO bondholders afforded by a statutory lien on pledged property tax revenues.
S&P Global’s review was conducted in connection with the City’s proposed refunding of outstanding GO Bonds in order to create economic savings in the current low-interest-rate environment.