Fitch Upgrades Providence’s Bond Rating to Highest Level Since Near Bankruptcy in 2011

Fitch Upgrades Providence’s Bond Rating to Highest Level Since Near Bankruptcy in 2011

The City of Providence announced that Fitch Ratings has completed its annual review of the City of Providence and upgraded the City’s ‘A-’ credit rating to ‘A’ on the City’s outstanding General Obligation (GO) Bonds. This is the first time that Providence has been upgraded to 'A' status since 2011.

In 2011, Providence faced a near financial meltdown. When Angel Taveras took over for outgoing Mayor David Cicilline, he called the city's financial situation a “Category 5 hurricane.” 

Providence increased taxes and slashed personnel, including police staffing. Providence Mayor Jorge Elorza allowed the police staffing level to fall to a 50-year low.

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In its published report, Fitch notes the City’s revenue growth and expenditure controls have contributed to surplus results over six consecutive fiscal years.

Fitch also stated that "operating performance has improved since fiscal 2016, and Fitch expects that management will continue its efforts to improve its reserve position due to recent budget stabilization measures and expected continued improvement in tax base values.”                                                       

Providence Rating in Focus                                                          

The Fitch report also discussed the City’s efforts to "improve financial resilience, the impact of the pandemic and related federal funding on the City and the City’s expectation of balanced operations for FY 2022" and noted, “Fitch expects that the city would utilize a combination of spending controls, revenue raising, and reserves in a downturn while maintaining adequate financial resilience.”

Fitch Ratings’ review was conducted in connection with their regular annual surveillance of the City’s credit. In addition to the GO Bond Rating, Fitch has upgraded Providence’s Issuer Default Rating (IDR) to ‘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 under Rhode Island law. 

“This rating upgrade reflects our success in tackling the City's fiscal challenges head on," said Elorza. "While we're not completely out of the woods yet, our finances are in the best shape they've been in in a very long time. I am proud that Fitch has recognized the hard work of our team and has upgraded our rating once again."