City bond rating is upgraded to 'AA'
Citing the city’s “very strong economy” as well as its retail base, development in City Centre Warwick, management and financial reserves, Stand & Poor’s Global Ratings has raised its long-term rating on the city ’s existing general obligation bonds from AA- to AA.
S&P has been assigned to the long-term rating to the Rhode Island Health & Education Building Corp.’s series 2017 revenue bonds issued for school improvements. The bonds total $4.46 million and are due in 2032. The improved rating is expected to result in lower interest costs on the revenue bonds.
But there’s a psychological impact to the improved rating that affirms Warwick is not only on the right track but also improving.
Predictably, Mayor Scott Avedisian was delighted with the development and in a release stated:
“Standard & Poor’s upgrade of our bond rating is great news and reflects our continued efforts to ensure that our economy is growing, we employ sound budgetary practices, and that we are meeting our financial obligations. This assessment is a reflection on the hard work of our finance team, who work every day to ensure that Warwick remains in a good fiscal position for the future.”
Ward 5 Councilman and chair of the Council Finance Committee Ed Ladouceur was miffed by how he learned of the development but pleased by the news.
“It seems information is disseminated to the press before the council,” Ladouceur said. “On the face it sounds like very good news to the city. Whenever a rating improves that’s a good thing.”
Ladouceur also said he is hopeful that council efforts to examine city spending and their diligence to control costs has had a positive effect on the rating.
In its summary, S&P termed the outlook for Warwick as “stable.”
“The rating change reflects Warwick’s increased budgetary flexibility, with an available fund balance in fiscal 2016 of 6.1 percent of operating expenditures and consistently balanced operating results,” the summary states.
The report calls the city’s budgetary “flexibility” as adequate with an available fund balance, or surplus, of $18.5 million in fiscal 2016.
In its analysis of Warwick’s economy, S&P said the city “continues to serve as one of the state’s leading commercial and retail centers, benefiting from close proximity to Providence, as well as being in the approximate geographic center of the state.” Green Airport is cited along with direct access to Interstates 95 and 295 as well as the Interlink and connection to rail service.
As for developments, S&P cites the re-purposing of Pontiac Mills for residential and commercial uses, construction of a 125-room Hyatt Place hotel, a new brewery as well as retail and restaurant renovations.
Concerning management, the report finds city finances as supported by “conservative budgeting practices with a history of mixed operating results, but better-than-budgeted results in positive economic cycles.”
The picture is not entirely rosy.
In its outlook, S&P says, “While we believe pension and OPEB [other post employment benefits excluding pensions] costs will likely remain a long-term credit concern, we expect the city to continue to manage these costs while maintaining stable finances and improving reserves from now on.”
S&P does not foresee a need to change the rating over the next two years.