Providence, R.I., received a boost from the capital markets as Moody’s Investors Service revised its general obligation rating to stable from negative.
Moody’s also affirmed the city’s Baa1 general obligation bond rating.
Moody’s, in a statement on Tuesday night, cited the city’s adoption of a structurally balanced fiscal 2014 budget and a pension-overhaul deal that Mayor Angel Taveras said kept Rhode Island’s capital out of bankruptcy.
Additionally, Moody’s affirmed the Baa2 rating on $361 million of lease appropriation revenue bonds issued through the Providence Public Buildings Authority for school projects through the Rhode Island Health and Education Building Corp.
Overall, the moves affected $582 million of outstanding debt. Fitch Ratings and Standard & Poor’s rate the GO bonds BBB.
“The affirmation of the city’s Baa1 underlying rating reflects the sizeable tax base with a significant institutional presence, improving but still high unemployment and low income levels,” Moody’s said in its report.
According to Moody’s, the building and redevelopment lease revenue bond ratings reflect the city’s general credit quality and the risk of annual appropriation.
In April, Rhode Island Superior Court Judge Sarah Taft-Carter signed off on a pension compromise between Providence and its police officers, firefighters and retirees.
“This is an historic day for the city of Providence,” Taveras said at the time.
Taft-Carter entered consent judgments finalizing changes that cap all pensions at either 150% of the state median income or less than the salary of the current employee in the position.
Officials say the compromise saves Providence $18.5 million this fiscal year and reduces its unfunded pension liability by about $170 million, from $900 million.
Under the agreement, all cost of living adjustments, or COLAs, are suspended for 10 years. After that, COLAs will only be reinstated for retirees who are under the pension cap, and COLAs will end when the cap is reached.
All 5% and 6% compounded COLAs are eliminated.