Pawtucket’s sound financial management, significantly improved finances, growing reserves, balancing of school budget and pension-OPEB reforms all major factors in upgrade to first A category rating since 2010

Mayor Donald R. Grebien today announced that Fitch Ratings has upgraded the City of Pawtucket’s outstanding General Obligation (GO) Bonds to ‘A+’ and has assigned a Stable outlook.  In addition to upgrading the City’s GO Bond rating, Fitch has upgraded Pawtucket’s underlying rating or, as Fitch terms it, Issuer Default Rating (IDR) to ‘A-’ from ‘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 tax revenues. The upgrade comes after a thorough review of the City’s financial and managerial operations by the rating agency earlier this month in connection with Fitch’s annual surveillance review of Pawtucket. The upgrade is expected to result in a lower cost of borrowing for the City on future debt.

“I am greatly encouraged that Fitch recognized, once again, the real progress we continue to make to improve the City’s fiscal health,” said Mayor Grebien. “I am proud that today Pawtucket has achieved its first A bond rating from Fitch since 2010. It takes a team, and by working collaboratively with the Pawtucket School Department and City Council to tighten our operating budgets and control our future obligations, we are creating real results for the taxpayers and moving Pawtucket forward. Through proven leadership, we continue to improve the finances of both the City and School Department while delivering high quality services efficiently and effectively. While this is great news, the rating upgrade provides us a reminder that we have more work to do, especially with regards to long-term obligations like our other post-employment benefits (OPEB), as Fitch points out,” said Mayor Grebien. “Fitch’s latest upgrade of the City’s bond rating is an acknowledgement that we are headed in the right direction. We will continue to work every day on behalf of the taxpayers to improve our bond rating, which will, in turn, lower our cost of borrowing.”

The Mayor was joined in the presentation to Fitch by Director of Administration Antonio Pires, Finance Director Joanna L’Heureux, Deputy Finance Director Jeannine Bourski and the City’s financial advisors, Maureen Gurghigian and Adam Krea of FirstSouthwest. The Mayor said he “commends the work of Director of Administration Pires and Finance Director L’Heureux for the comprehensive presentation they made to Fitch, and more importantly the great work they’ve done on behalf of the City over the last five years to set the stage for this upgrade. Our multifaceted preparation presented a full picture of the real progress we’ve achieved together.  “The City’s underlying rating has moved up three notches in the past three years thanks to everyone’s hard work and common goal of moving the City towards financial health.”

The Fitch report notes that “recent financial performance has been positive, strengthening the city’s financial flexibility.”  However, the report also says “a notable pension liability in two of the city’s pension plans coupled with a hefty OPEB liability offsets the low debt burden”.  To Mayor Grebien’s point about expectations, the report states that “Fitch expects the city will continue its past practice of increasing reserves during an economic recovery and managing expenditures…”. 

Finance Director L’Heureux said, “Our A category rating factors in the City’s steady management principles, improved fiscal health and the elimination deficits on the school side with continuing balanced budgets. The rating also includes our conservative approach to debt, including capitalizing on programs like the State’s new Infrastructure Bank, and recently implemented pension and OPEB reforms.” 

Maureen Gurghigian, FirstSouthwest Managing Director said, “Achieving the City’s first A rating in over 6 years is a recognition of the real results the City has achieved over the past five years. Rating agencies take much longer to upgrade communities than to downgrade them.”  She continued, “Pawtucket has experienced improved market access over the last five years as evidenced by successful general obligation bond and note sales, and with a rating in the A category from Fitch now, we expect the City to continue to realize improved rates offered by investors.”  She noted that investor acceptance of the issuer is an important consideration in the pricing of municipal bonds. “Upgrades can be expected to increase the number of potential buyers for the City’s bonds. The marketplace recognizes proven leadership and results.” Gurghigian added.