Standard & Poor's revised its outlook to positive from stable for its long-term underlying A rating on Cranston, R.I., general obligation debt.
"We believe there is a possibility Cranston's budgetary flexibility could strengthen over the two-year outlook period due to its positive operating performance," S&P said in a June 5 statement. "We also believe Cranston's improved operational position is likely to translate into it maintaining stronger available reserves over time."
The city's full-faith-and-credit pledge secures the bonds.
Cranston Mayor Allan Fung is a Republican candidate for governor.
In March, Moody's Investors Service removed its negative outlook on Cranston, citing the city's pension deal with municipal workers and retirees.
Under the agreement, Cranston stands to contribute $6 million less to the police and fire pension plan than otherwise in fiscal 2014. It combines caps freezes and reduces cost-of-living increases, or COLAs, over 30 years and reamortizes its $300 million unfunded liability.
"It took a lot of time and a lot of effort to reach this settlement. This problem was an albatross around the city's finances for years," Fung, said at the time.
