BRADENTON, Fla. – Fiscally struggling Petersburg, Va., was removed from CreditWatch by S&P Global Ratings, though it maintained a negative outlook on the city despite the city's hiring of a turnaround firm.
S&P maintained its junk BB ratings on the city's general obligation bonds Wednesday.
Petersburg had about $55.3 million of outstanding privately placed full faith and credit GO and Qualified Zone Academy bonds at the end of fiscal 2015.
"We removed the rating from CreditWatch due to the city securing $6.5 million in cash-flow notes," said analyst Timothy Little. "The negative outlook reflects the extreme uncertainty regarding the city's ability to return to structural balance and what will likely be persistently very weak liquidity in a difficult budgetary environment."
Little said the city secured $6.5 million of tax anticipation notes from Wells Fargo at a 4.5% interest rate for 10 months.
"In our opinion, the interest rate is high compared to other non-distressed entities that annually place TANs, further underscoring the fiscal distress of the city," he said.
In fiscal 2015, the city's general fund spent $82.9 million while revenues totaled $77 million, a deficiency of $5.9 million or a negative 6.7%.
The negative variance largely reflects revenues, mainly general property taxes of $3.5 million and other local taxes of $1.8 million, coming in under budget, and expenditures for public safety and health and welfare exceeding budget by $2.5 million, according to S&P.
A state technical assistance team reported that general fund expenditures exceeded revenue by at least $5.3 million in fiscal 2016, and also identified a structural imbalance with the city's fiscal 2017 budget.
The fiscal 2016 audit has not been released.
The state has estimated that the city has $18.8 million in unpaid obligations to external entities and internal loans, including repayment of the TANs.
Petersburg, with a population of 33,000, is located in the Richmond metropolitan statistical area.
Although S&P said the economy is diverse, the city's 27.5% poverty rate is more than double the percentage of people living in poverty in Virginia, according to the U.S. Census Bureau.
In October, the city council hired the Washington, D.C.-based Robert Bobb Group to serve as interim city management for a five-month period at a cost of $350,000, plus up to $25,000 for expenses.
Robert Bobb previously served as Richmond's city manager from 1986 until 1997. He has also been emergency manager for Detroit Public Schools and city manager for Kalamazoo, Mich., Oakland, Calif., Santa Ana, Calif., and Washington, D.C.
In an attempt to mitigate its deficit, the Petersburg council cut employee pay 10% across-the-board, resulting in 146 resignations and leave payouts. Most senior department heads have resigned.
A lawsuit has been filed over the city's spending, and at least one investigation into it finances is underway, according to published reports.
