Philadelphia, the country’s fifth most-populous city, had its general-obligation debt grade raised one step by Standard & Poor’s, which cited the elimination of a 2011 deficit and this year’s projected surplus
The city’s rating rose to BBB+, the third-lowest investment level, from BBB, with a positive outlook, New York-based S&P said today in a statement.
“If the economic recovery is slow to gain momentum, stagnates, or retrenches, Philadelphia’s strong management practices will allow it to continue to take the necessary actions to address imbalances,” Nicole Ridberg, S&P’s primary analyst for the city, said in the report. About a quarter of the city’s 1.53 million residents live in poverty, twice the Pennsylvania average, according to U.S. Census Bureau data.
Another upgrade is possible within two years if the city continues to rebuild financial reserves, said Ridberg, who is based in New York. The city had budget surpluses in fiscal 2010 and 2011, according to the report.
The S&P analysts cited fiscal oversight by the Pennsylvania Intergovernmental Cooperation Authority, a state agency that reviews Philadelphia’s annual five-year financial plans. The raters also said economic diversification, focused on health care and higher education, “should position the city for growth as recovery ensues.”
Negatives noted in the report were cost pressures from health care and pensions, high debt levels and the lingering effects of the recession. Philadelphia’s pension plan (11782MF:US), with assets valued at about $4.45 billion in 2010, had a projected unfunded liability of about $5.1 billion that year, according to data compiled by Bloomberg.
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