Central Falls, R.I.'s reporting of a $1.6 million surplus less than two years after exiting bankruptcy is a credit positive, according to Moody's Investors Service.
The surplus, before capital transfers, is for the fiscal year ended June 30, 2013.
"These credit positive results provide evidence that the city's six-year recovery plan, developed as part of the bankruptcy process, is on track to stabilizing the city's financial operations," Moody's said after Central Falls reported the surplus on March 20.
Moody's rates the 19,000 population city B1 with a positive outlook.
Central Falls, only one square mile big, filed for Chapter 9 bankruptcy protection on Aug. 1, 2011. It emerged 13 months later. Capital markets observers say Rhode Island's law giving bondholders priority in a bankruptcy filing helped ease the process. Bondholders emerged unharmed from the bankruptcy, in contrast to other creditors such as city pensioners.
Moody's said the steady recovery of Central Falls contrasts with Vallejo, Calif., which emerged from bankruptcy in 2011, but remains in structural imbalance and projects a deficit in 2014.
Central Falls' recovery plan includes a combination of annual property tax increases, ongoing spending controls and savings in pension and healthcare-related costs. The city transferred $1.79 million to its capital reserve fund during fiscal 2013 to fund some of the more than $125 million in deferred maintenance, a requirement of the recovery plan.
