City receives its highest rating in history from Standard & Poor’s.
December 23, 2013– Standard & Poor’s Ratings Services (S&P) has raised the City of Philadelphia’s bond rating to its highest level ever, lifting its long-term and underlying rating on the City’s general obligation (GO) debt to A+ with a stable outlook, up from A-.
In the last two and a half years including this action, Standard & Poor’s Rating Service has upgraded the City’s GO rating three times. In June 2013, S&P raised the City’s rating to A- from BBB+ and in April 2012 the City’s ratings were raised to BBB+ from BBB. Prior to the upgrade in June 2013, it had been more than 30 years since the City was rated in the A category by all three major rating agencies.
“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,” said Mayor Michael A. Nutter. “This upgrade recognizes the City’s strong financial management practices and the diligent work of Finance Director Rob Dubow, City Treasurer Nancy Winkler, Budget Director Rebecca Rhynhart and their staffs. And Philadelphians should know that in very practical terms, a higher bond rating means a lower cost of borrowing.”
Over the last several months, S&P has been applying new credit rating standards to municipal issuers. The standards evaluate overall economy, financial management including budgetary flexibility and performance, debt management and liquidity.
In its September 2013 report announcing its change in methodology, S&P estimated that “assuming that governments maintain their current credit characteristics, testing suggests that about 60% of the ratings would remain unchanged under the criteria while about 30% of the ratings would increase and about 10% would decrease, generally by one notch.” By way of background, Seattle, New York, Memphis and Washington DC’s ratings remained unchanged when S&P applied the new standards to their GO ratings in recent weeks.
City Treasurer Nancy Winkler said, “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 cost 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.”
“We view the City’s management conditions as very strong, with strong financial practices,” said S&P Analyst Hilary Sutton. The report also noted the City’s “very strong liquidity” and “strong budgetary performance.”