Standard & Poor's has upgraded Philadelphia's general obligation debt to A-plus from A-minus.
S&P took the action on Dec. 23 based on its recently released local GO criteria. S&P also raised its long-term and underlying ratings on Philadelphia Redevelopment Authority's, Philadelphia Authority for Industrial Development's, and Philadelphia Municipal Authority's GO-equivalent appropriation debt, supported by the city.
S&P has a stable outlook on the ratings.
Supporting the upgrade, S&P analysts Hillary Sutton and Karl Jacob pointed to the city's very strong management conditions and strong policies and very strong liquidity. They also noted the city's strong budgetary performance and adequate budgetary flexibility, with 2013 unaudited actual reserves at 7.2% of general fund expenditures.
Tempering the positive assessment, the analysts pointed to the city's weak economy and high unemployment and weak debt and contingent liabilities position. Regarding the latter, they said that total government debt service is 6.2% of total governmental funds and net direct debt is 64.4% of total governmental funds revenue.
The city's municipal pension plan was funded at a 48% level as of July 1, 2012. As of July 1, 2011, the city's unfunded-actuarial-accrued other post-employment benefits liability was $1.2 billion.
In the last 2.5 years S&P has upgraded Philadelphia three times. In April 2012 it raised the city to BBB-plus from BBB. In June it upgraded the city to A-minus from BBB. Prior to June it had been more than 30 years since all three rating agencies had rated the city at A or better.
Philadelphia Mayor Michael Nutter said, "I am very proud that the city's bond rating has, once again, been upgraded - this time to its highest rating ever received from S&P. This upgrade recognizes the city's strong financial management practices and the diligent work of finance director Rob Dubrow, city treasurer Nancy Winkler, budget director Rebecca Rhynhart and their staffs."
Winkler added: "The mayor's finance team has worked hard to stabilize the city's finances and to position the city to be able to withstand growing costs pressures and other financial challenges we face. While we appreciate S&P has recognized our hard work, as one of the lowest rated large cities, it's clear that there's more we need to do, including improving our pension funding and improving our fund balance."
Fitch Ratings rates Philadelphia's GO bonds A-minus and Moody's Investors Service rates them A2.