Standard & Poor's on March 3 revised its long-term outlook on Central Falls, R.I.’s general obligation bonds to positive from stable while also affirming its junk-level BB long-term rating.
Central Falls, Rhode island’s smallest and poorest city with a 19,000 population, filed for Chapter 9 bankruptcy in August 2011, reporting an $80 million unfunded pension liability. It exited 13 months later after realizing benefit cuts of up to 55% for retirees. Some cuts were restored.
“The outlook revision reflects our opinion of the city's ongoing adherence to the established post-bankruptcy plan and improved financial management controls that we believe will likely be sustained and continue to translate into it maintaining stable operations,” said Standard & Poor's credit analyst Victor Medeiros. “At the same time, we expect the city to remain proactive in funding its long-term liabilities, ensuring those costs and overall budgetary performance remain stable and strong over the long term.”
The city's full faith and credit is pledged to the bonds.
For S&P to consider raising the rating, said Medeiros, the city would need to adhere to its to financial plan over the next several years, given increasing costs and what the rating agency called still-tepid revenue.
“In our opinion, the city's stable budgetary environment and continued progress toward funding long-term liabilities would be additional factors in our raising the rating,” Medeiros added.