East Providence, R.I., has received another multi-notch downgrade, this time from Standard & Poor’s, which lowered the city’s long-term general obligation rating three levels to a junk-status BB-plus from BBB-plus.
The rating agency also placed East Providence on credit watch with developing implications. It cited the inability of the city, which has about 49,000 residents, to sell its intended amount of cash-flow notes.
The downgrade also reflects the city’s difficulty in balancing its budget, according to Standard & Poor’s.
Last week, Rhode Island Gov. Lincoln Chafee appointed a five-member commission to oversee the city’s finances at the insistence of its overseer, state police Major Stephen Bannon.
The budget commission is the second of three state-intervention steps.
The next and final state step would be to appoint a receiver, the fate that befell 19,000-population Central Falls, which filed for Chapter 9 bankruptcy protection on Aug. 1 at the direction of its receiver, Robert Flanders.
East Providence earlier this month issued $10 million of tax anticipation notes, far short of the $30 million city officials originally had intended.
According to the Standard & Poor’s report dated Friday, city officials estimate they will need to issue an additional $18.5 million of Tans in January. The city traditionally issues Tans to ease cash-flow pressures that stem from the timing of property tax collections.
Moody’s Investors Service has lowered East Providence’s GO bond rating six notches this year to Ba1 — also junk — from A1.
Its latest downgrade came on Dec. 12, when it dropped the rating three levels, from Baa1.
The state received some positive news on another front, when Standard & Poor’s raised its rating on the Rhode Island Economic Development Corp.’s grant anticipation revenue bonds to AA-minus from A-plus. The outlook for the bonds, issued on behalf of the Rhode Island Department of Transportation, is stable.
Standard & Poor’s cited improved coverage of about four times maximum annual debt service of $52.8 million in 2017, based on fiscal 2011 receipts’ strong bond provisions, including a three times additional bonds test for debt issued beyond the federal aid authorization period then in effect; strong program support from the federal and state governments; and effective management of the reimbursement process.
The rating agency said the Department of Transportation has capably managed five high-priority projects — the Interstate 195 relocation in Providence; the access road for Quonset Business Park in North Kingstown; the freight rail improvement program relocation; the Washington Bridge between Providence and East Providence; and the Sakonnet Bridge between Tiverton and Portsmouth.
