North Providence, RI General Obligation Debt Upgraded To #AA-# From #A# On Improved Financial Position, Stronger Economy

Stocks and Financial Services Press Releases Wednesday March 8, 2017 09:37
BOSTON--8 Mar--S&P Global Ratings

BOSTON (S&P Global Ratings) March 7, 2017--S&P Global Ratings raised its long-term rating on the Town of North Providence, R.I.'s general obligation (GO) bonds to 'AA-' from 'A'. The outlook is stable. "The upgrade reflects our view of improvements in the town's financial position as well as stronger economic conditions," said S&P Global Ratings credit analyst Christina Marin.

A pledge of the town's full faith and credit secures the GO debt outstanding. The rating further reflects our assessment of North Providence's: Adequate economy, with access to a broad and diverse metropolitan statistical area (MSA); Adequate management, with "standard" financial policies and practices under our financial management assessment (FMA) methodology; Strong budgetary performance, with operating surpluses in the general fund and at the total governmental fund level in fiscal 2016; Adequate budgetary flexibility, with an available fund balance in fiscal 2016 of 5.2% of operating expenditures; Very strong liquidity, with total government available cash at 14.1% of total governmental fund expenditures and 3.3x governmental debt service, and access to external liquidity we consider strong; Very strong debt and contingent liability position, with debt service carrying charges at 4.2% of expenditures and net direct debt that is 12.0% of total governmental fund revenue, as well as low overall net debt at less than 3.0% of market value and rapid amortization, with 98.6% of debt scheduled to be retired in 10 years; and Strong institutional framework score.

The stable outlook reflects our view that North Providence's general fund financial position has stabilized, and that strong budgetary oversight and careful planning should translate into balanced operations in the future. The town's adequate economy and very strong liquidity contribute to stable credit conditions. Therefore, we do not expect to change our outlook in our two-year outlook horizon. We would consider a higher rating if the town builds reserves to levels we consider very strong, and if the town introduces more formal financial policies. We could lower the rating if the town returns to financial imbalance, leading to a draw on reserves.

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