PHILADELPHIA, PA — Moody’s Investors Service and S&P Global Ratings have upgraded Philadelphia’s credit rating, a smashing success for the City. Moody’s has raised the City’s rating to ‘A1’ from ‘A2’, with a long-term Stable outlook, while S&P has maintained the City’s A rating, but revised its outlook to positive. It’s a significant accomplishment for Philadelphia, as it already has its highest ratings in decades, indicating a positive sign in the City’s financial status. The credit rating is a crucial factor that impacts the City’s infrastructure borrowing interest rate.
In announcing the change to the City’s Issuer Rating, Moody’s reported that “Philadelphia’s fund balance and liquidity has notably improved over the past three years” and that the City has a consistent track record of strong financial management and responsible budget controls. Moody’s also considers the City’s ability and willingness to proactively improve the health of its pension fund as a credit strength. This action marks the first time since 2018 that Moody’s has updated the City’s rating.
“We are proud of the latest positive ratings achieved by the City of Philadelphia,” said Mayor Jim Kenney. “Our administration has made the City’s financial health a priority and we’re pleased with the latest results of our ongoing efforts.”
S&P Global Ratings’ outlook revision indicates “at least a one-in-three chance” of a rating increase within the next two years if the city can maintain strong reserves and financial results in line with current estimates.
“The recent rating actions are a major accomplishment and a testament to the City’s commitment to our financial health,” said Jackie Dunn, City Treasurer. “Our ratings reflect the progress the City has made over time on important issues like rebuilding reserves and improving the health of our pension fund.”
The City ended Fiscal Year 2022 with a $779 million audited fund balance, its highest ever. The Fiscal Year 2023 estimated balance is approximately $619 million or 10.5 percent of revenues and the City will also make a $65 million deposit to the rainy-day fund to build reserves. The City has also made significant progress improving the health of the pension fund. In five years, the pension funding ratio improved from 44 percent to 57.6 percent on an actuarial basis, and the City continues its practice of contributing more than state law’s annual required contribution.
The City has been rated in the ‘A’ category by all three rating agencies since 2013, but the Moody’s upgrade means that the City has its highest combination of ratings in more than four decades. S&P Global Ratings maintained the ‘A’ rating with the Positive outlook adjustment and Fitch Ratings affirmed the current ‘A’ Stable rating. Fitch previously upgraded the City’s rating from ‘A-‘ to ‘A’ in July 2022.
The rating actions come in advance of the City’s upcoming bond sale. Philadelphia will price $100 million in Social bonds for the Neighborhood Preservation Initiative to invest in affordable housing, commercial corridors, and small business revitalization in May.
More information about the City’s ratings is available online.
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