Moody’s Upgrades North Providence’s GO Bond Rating
Friday, August 26, 2016
The City of North Providence has received good news from the bond rating agency Moody’s and the firm has upgraded the Town of North Providence, RI's general obligation bond rating to A2 from A3. The upgrade to A2 rating “reflects the continued stabilization of the town's financial position and expectation that this trend will continue.”
Accordingly, the A2 also takes into account the satisfactory funding of pension liabilities, below average debt burden and average socioeconomic profile.
The improved bond rating is welcomed news for Mayor Charles Lombardi who is seeking re-election in a tough primary. It re-inforces his claims of strong financial leadership.
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Moody's does not generally assign outlooks to local government credits with this amount of debt outstanding.
Factors that Could Lead to an Upgrade
Sustained increase in reserves and liquidity
Continued improvements in overall pension funding levels or reductions of unfunded liabilities
Increase in the size or wealth of the local economy
Factors that Could Lead to a Downgrade
Structurally imbalanced operations resulting in erosion of reserves
Inability or unwillingness to fully fund annual required pension payments
Material increase in debt leading to a loss of financial flexibility
Legal Security
The town's 2007 GO bonds are general obligations of the town and are secured by an unlimited property tax
pledge.
The Series 2013 bonds are special obligations of the Rhode Island Health and Educational Building
Corporation (RIHEBC), secured solely by a pledge of payments made by North Providence under the financing
agreement between the town and RIHEBC. The town's pledge is a GO pledge.
Moody's also maintains an A1 enhanced rating on the Series 2013 bonds based on RIHEBC's monthly pay
Intercept Program. The RIHEBC Intercept Program's A1 programmatic rating reflects the state's commitment
to intercept state funds appropriated to participating borrowers to ensure timely debt service payment to
bondholders, and is notched off Rhode Island's Aa2 general obligation rating.
The town's bonds benefit from state legislation passed in 2011 that provides a statutory lien on ad valorem
taxes and general fund revenues, giving priority to payment of general obligation debt in bankruptcy
proceedings.
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