Standard & Poor’s upgraded its long-term rating and underlying rating on Philadelphia’s general obligation debt to BBB-plus from BBB, with a positive outlook.

The rating agency said the upgrade reflects its assessment of the city’s progress in eliminating a large general fund deficit in fiscal 2011 and a projected fund surplus in fiscal 2012.

Mayor Michael Nutter said the upgrade shows that the city is making progress in managing its finances.

“It’s a validation of the steps we have taken and continue to take to maintain fiscal integrity while providing high-quality services to citizens and better managing our government,” Nutter said in a statement.

Standard & Poor’s said the positive outlook reflects its view that with continued prudent financial management and oversight from the Pennsylvania Intergovernmental Cooperation Authority, the city will likely continue to maintain balanced operations and build on its general fund reserves.

“Should the city be successful in further rebuilding reserves, we could consider an upgrade within the outlook’s two-year period,” said S&P analyst Nicole Ridberg.

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