Standard & Poor's Ratings Services said today it raised its long-term rating and underlying rating (SPUR) on Philadelphia's general obligation (GO) debt one notch to 'A-' from 'BBB+'. The outlook is stable.
At the same time, Standard & Poor's assigned its 'A-' long-term rating to the city's series 2013A and 2013B GO bonds.
"The upgrade reflects our assessment of the city's progress in restoring its general fund balance through cost containment as well as stronger revenue streams," said Standard & Poor's credit analyst Hilary Sutton.
Standard & Poor's also raised its long-term rating and SPUR on Philadelphia Redevelopment Authority's; Philadelphia Industrial Development Authority's; and Philadelphia Municipal Authority's GO-equivalent appropriation debt, supported by the city, one notch to 'A-' from 'BBB+'.
The 'A-' rating reflects what we view as the city's:
• Proactive administration that has taken action to rebalance operations during a difficult recession, evidenced by surpluses in fiscal years 2010, 2011, and 2012 that have helped reverse a trend of general fund deficits;
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• Fiscal oversight provided by the Pennsylvania Intergovernmental Cooperation Authority, as well as the discipline of an instituted five-year plan requirement; and
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• Economic diversification, despite the recession, into more growth-oriented sectors, such as health care, higher education, and services, which should position the city for growth as recovery ensues.
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We believe somewhat offsetting factors include the city's:
• Continued cost pressures related to health care and pensions and the recession's effect on the city, which we believe have pressured, and will continue to pressure, operations; and
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• High overall net debt due largely to significant deficit financing related to fiscal distress in the early 1990s, a 1999 pension bond issuance, a significant neighborhood revitalization program, and the issuance of general-fund-supported debt to finance the construction of two new stadiums; officials, however, expect additional planned GO debt issuance to be modest.
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The city's full-faith-and-credit GO pledge secures the 2013A and 2013B GO bonds. Officials intend to use bond proceeds for capital projects as well as the refunding of various series of the city's GO bonds for debt service savings.
