PROVIDENCE, RI –
Mayor Jorge Elorza today announced that Fitch Ratings has affirmed the City of
Providence’s A- rating on its outstanding General Obligation Bonds. In
addition, Mayor Elorza announced that the City is expecting a combined year-end
operating surplus for Fiscal Year 2018 of $9,114,994.
“This is good news for Providence. Fitch has recognized that we
have worked diligently to stabilize our finances,” said Mayor Elorza.
“Maintaining our current rating is important as we continue to see the results
of our work. Both our ratings affirmation and our expected operating
surplus show that we are on the right path here in Rhode Island’s capital.”
The Fitch report notes the City’s strengths such as its tax
base, location, improved financial results and declining unemployment.
Mayor Elorza said he is more focused on the long term challenges and is
encouraged to see that Fitch recognizes the City’s steps to address them.
“Fitch correctly points out that earlier periods of fiscal stress have had a
negative impact on the City,” notes Mayor Elorza.
Fitch said, “The assessment reflects a period of strained fiscal
operations prior to fiscal 2016. Operating performance has improved based on
fiscal 2017 results and projections for fiscal 2018, which show eradication of
negative fund balances. The city's financial resilience is weak, but the
aforementioned projections reflect management's progress in restoring its fund
balance to positive levels.” The City has rebounded from its negative
$13.4 million fund balance with three years of operating surpluses, including a
projected $9.1 million surplus for the year ended June 30, 2018. The City
is projected to have $11.3 million in a positive fund balance as of June 30,
“It also clearly states the City is addressing its legacy
financial issues, including the City’s return to a positive fund balance
position earlier than anticipated. We have been paying the full required
contribution to our pension plans and have been able to achieve savings in
healthcare and long-term costs. Our employees have worked very hard to achieve
budget stability and deserve tremendous credit,” the Mayor added.
As budgets are educated estimates of projected costs and
collections and cannot account for unanticipated expenses or revenues,
surpluses do occur. This year’s significant surplus can be attributed to:
Realistic budgeting practices
Better cash management and tax collections
Non-essential hiring freeze
Better departmental revenue
Lower salary expenditures
Reduced spending on operational expenses, where opportunities
The total $9.1M operating surplus is applied directly to the
general fund operating fund balance.
In their report, Fitch indicated that strong budget management
is crucial, “The rating is sensitive to the city's ability to continue to
address any budget imbalances. Restoration of reserves to more adequate levels,
and maintenance of an adequate level of budgetary flexibility could improve
Fitch also warned that containment of long term liabilities will
continue to be important to their analysis, “Fitch expects the city's long term
liabilities exposure to remain a burden on the budget. Notable growth in the
budget burden associated with these liabilities would reduce financial
flexibility further and could negatively affect the rating.”
review was conducted in connection with Fitch Ratings’ annual surveillance of
the City’s credit. In addition to the GO Bond Rating, Fitch has affirmed
Providence’s Issuer Default Rating (IDR) at ‘BBB.’ According to Fitch, the GO
bond rating is two steps above the IDR, which reflects the enhanced recovery
prospects for GO bondholders afforded by a statutory lien on pledged property