Moody’s Investors Service upgraded East Providence, R.I.’s general obligation bond rating to Baa3 from Ba1 and revised its outlook to positive, putting it at the lowest rung of investment grade.

Wednesday night’s move affects roughly $21 million in debt and marks the latest credit improvement for the 49,000-population city, which emerged in September from the oversight of a state-imposed budget commission.

Earlier this month, Standard & Poor’s raised its rating by five notches, to A from BB-plus.

“Congratulations to the city of East Providence on Moody’s Investors Service general obligation rating upgrade from Ba1 to Baa3,” Gov. Lincoln Chafee said in a statement Wednesday afternoon.

“All of the difficult decisions by the budget commission and city officials have been recognized by the national rating agency,” he said.

Chafee praised commission members Michael O’Keefe, Diane Brennan, Steve Bannon, City Council president and Mayor James Briden, city manager Peter Grazykowski and state revenue Director Rosemary Booth Gallogly.

Concurrently, Moody’s upgraded to Baa1 from Baa2 the rating on the Rhode Island Health and Education Building Corp. Series 2007C bond issue to Baa1 from Baa2, also with a positive outlook.

The upgrade, said Moody’s, “reflects its improved financial position, following the disbanding of the state appointed budget commission. Under the direction of the state, the city has increased its reserve levels, improved its cash flow position, and implemented policies to ensure fiscal stability.”

The positive outlook, said Moody’s, “reflects our expectation that the city will continue make appropriate adjustments as needed to maintain fiscal stability.”

Moody’s, however, warned that increased reliance on cash-flow borrowing, failure to maintain structural balance, underfunding of the public safety annual required contribution or a weakening of the general fund or school fund balance positions could push the rating downward.

Moody’s also cited the city’s $50 million one-time revenue from Google Inc., which East Providence used for pension relief, as part of the online search engine’s settlement with the U.S. Department of Justice regarding the  distribution of ads for illegal prescription drug sales.

East Providence and North Providence each received funds because their officers assisted in the investigation.

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