Moody's follows S&P's lead, upgrades East Providence's bond rating
EAST PROVIDENCE — On the heels of a similar move by Standard and Poor's earlier in the month, Moody’s Investor Service upgraded East Providence's bond rating to “Baa3” from “Ba1," the bond rating agency making the announcement Wednesday, Oct. 23. Moody's also deemed the city's fiscal outlook as "positive."
The upgrade reflects the East Providence's improved financial position, following the disbanding of the Budget Commission. The city has increased its reserve levels, improved its cash flow position and implemented policies to ensure fiscal stability moving forward. The rating also reflects the reduction of the city’s unfunded liability in its self-administered pension plan.
In addition, the Baa3 rating incorporates East Providence’s sizable tax base with average wealth levels and a manageable direct debt burden. The positive outlook reflects Moody’s expectation that the city’s financial position will continue to improve over the near term. Moody’s anticipates that East Providence will continue to address its sizable long term liabilities for pension and OPEB, and maintain structurally balanced General Fund and School Unrestricted fund operations.
“The Moody’s upgrade of our general obligation to an investment grade rating is an extremely positive development for the City," said East Providence City Manager Peter Graczykowski. "It follows closely the October 1, 2013 upgrade from Standard & Poor’s Rating Services to ‘A’ from ‘BB+’ rating. Both bond rating upgrades recognize the hard work of the East Providence Budget Commission, as well as the City Council, School Committee and City and School management teams. We hope to review the Moody’s rating in the near future again so that our continued financial turnaround can be revaluated further.”
Recognizing the upgrade of the East Providence’s rating to “Baa3,” Moody's has also upgraded to “Baa1” from “Baa2” the rating on the Rhode Island Health and Education Building Corporation (RIHEBC) Bond Issue, Series 2007C. The outlook on this debt is also “positive.”
“The 15-month, policy-making tenure of the Budget Commission, working alongside City and School staff who took on the extraordinary effort to implement the fiscally prudent directives has resulted in many improvements that comprised the fiscal stability," Mr. Graczykowski added.
Some of the directives highlighted by the city manager were:
* Stabilization of the cash flow issues
* Reduction of the City’s reliance on short-term borrowing
* Adoption of a balanced five-year plan which fully funds the pension fund ARC and the OPEB liability
* Adoption of a revised FY2012 budget with a 20% expenditure cuts
* Creation of a budget reserve ‘rainy day’ fund
* Support of fiscal year synchronization
* Alignment of School expenditures with other similar communities
* Securing of financing for the Wastewater treatment plant upgrades
* Securing of financing for school building safety improvements
* Implementation of the state income tax refund offset program
* Phase-out of the 15% homestead exemption and the 3% pre-payment discount
* An audit of the homestead exemptions for eligibility
* Review of all tax exempt properties for eligibility
* Negotiation of five-year contracts for a majority of the City’s and Schools’ unions substantially reducing the OPEB liability and standardizing medical benefits for all employees
* Health plan rates reduction by combining City and School risk
* Consolidation of the City and School Finance and Human Resources
* Move of School administrative personnel into City Hall
* Participation in the regional sanitation bid
* Replacement Enterprise Resource Planning/Financial Management software to replace an outdated system
* Street Light Management program and
* Adoption of various policies and procedures to assure a continued culture of accountability.
"As the fiscal stability plan components charted in this turnaround were modeled on credit rating agencies’ recommendations the city was rewarded with recognition of its efforts with bond rating upgrades to an investment grade from both Standard & Poor’s and Moody’s," Mr. Graczykowski added. "The city plans to continue to identify and implement operational and budgeting efficiencies through consolidations and joint action, locally and regionally."