Upgrade: Wall St. loves Philly tax hikes, spending cuts, state controls

The Standard & Poor's Rating Services agency has boosted Philadelphia's general-obligation bond rating to BBB+, from BBB, and is considering another upgrade, as the city prepares to borrow $22 million in g.o. refunding bonds and $95 million to refinance its Neighborhood Transformation Initiative debt. Better ratings can mean cheaper borrowing costs.

"Philadelphia should be congratulated. They avoided a downgrade," unlike many cities whose ratings have lately been cut, and "officials made tough choices that improved their rating, helping their borrowing costs, which further improves their overall financial picture," John Donaldson, director of fixed income at Haverford Trust Co., told me in an email note.

Philadelphia's "strong management practices," under Mayor Nutter and finance director Rob Dubow and treasurer Nancy Winkler, and the state oversight board that reviews city spending, under Sam Katz, have taken "necessary actions" to eliminate deficits, "especially in light of its need to make catch-up pension payments" the next two years, and "offset lost revenue" when the city's emergency 1% sales-tax surcharge expires in 2014, S&P wrote.

The city faces "continued cost pressures related to health care and pension" costs, a lot of debt left over from the stadium-building and private-pension-manager  borrowing campaign under ex-Mayor Ed Rendell, and other fiscal threats. But the Nutter administration's mostly "prudent financial management and oversight from the Pennsyvlania Intergovenrmental Cooperation Authority" will likely result in "balanced" spending and fatter reserves, S&P analyst Nicole Ridberg concluded.

Continue Reading