Moody's Investors Service said it has assigned a Baa1 rating to the city of Reading, Pa.'s $35.24 million federally taxable general obligation bonds, Series of 2014.
The bonds are secured by the city's general obligation, unlimited tax pledge. Concurrently, Moody's has upgraded to Baa1 from Baa2 the long-term rating on approximately $105.6 million in outstanding rated debt.
Proceeds from the current issue will be used to refund the Series 2008C (variable rate) and Series 2008D (variable rate) general obligation notes for estimated net savings of $2.2 million, or 3.3% of refunded principal over the life of the refunding, with no extension of maturity.
The upgrade to Baa1 reflects the city's improved financial position.
Since entering into the Act 47 distressed cities program in 2009, the city's finances have stabilized, resulting in a return to structural balance and growing reserve levels, with another operating surplus expected in fiscal 2014.
While the city is still faced with challenges, such as a weak tax base and an economically sensitive revenue composition, reliance on transfers from the water and sewer systems, and sizeable fixed costs that could result in future budgetary pressures, the city's improved financial flexibility helps to mitigate these risks. The rating also incorporates a declining urban tax base with weak socioeconomic indicators, including high poverty and unemployment rates, and a very high debt burden.
