Moody's Upgrades Cranston's Bond Rating

CRANSTON, RI—With the city’s financial house in relatively good order, Moody’s Investors Service has given the city yet another bond rating upgrade.

Moody’s announced on Friday that it upgraded Cranston’s rating from A2 to A1 because of the city’s sizeable and diverse tax base with “above average demographics” and the city’s overall financial performance as of late.

The upgrade is for $70.8 million of the city’s outstanding general obligation debt and could end up saving the city money as higher bond ratings usually translate into lower interest paid on borrowing.

Moody’s noted that Cranston’s financial position continues to improve and the city’s reserve funds are “adequate.”

The ratings agency said that the city has a manageable debt burden but the large unfunded pension liability continues to loom large.

But, according to the ratings report, things seem to be on an upswing. The city continues to generate surpluses each fiscal year, which is “leading to a significant growth in liquidity and fund balance.”

The tax base has expanded significantly and it looks like more Cranstonians are struggling less. Moody’s reported that the city has seen “material improvement in the demographic profile.”

In other words, Cranston residents are earning more money, unemployed people are working again and property values are increasing.

Risk factors that could reverse the positive trend are present, Moody’s said. The city would be stepping backward if the pension suddenly was no longer fully funded, if debt grows and “legal security.”

“The bonds are general obligations of the city and secured by an unlimited property tax pledge,” the report warned.

Moody's assigned the A2 rating and removed a "negative" outlook in 2014 after the Fung administration and retirees brokered a deal to stabilize the locally-administered pension plan that was plummeting toward insolvency.

On Monday, Fung said that the upgrade is "fantastic news."

"We've come a long way and restoring fiscal accountability to the City of Cranston has been a priority of my administration. When we first took office, we inherited deficits in the city and school budgets and our Rainy Day Fund was headed in the wrong direction," Fung said in prepared remarks. "Under my administration, our entire community, including municipal employees and residents, has worked together to restore our fiscal health. We made cuts to our budget, reformed our local pension plan, reduced debt to manageable levels and built up a healthy rainy day fund."