An upgrade in Pittsburgh’s financial outlook from a major rating agency won’t affect the interest rate on a $50 million bond issue later this month, but it could be a precursor to a rating increase in the next two years.
Moody’s Investors Service raised the city’s outlook on Thursday from A1 Stable to A1 Positive in advance of the city’s plan to issue $50 million worth of bonds to begin long-delayed capital improvements. Standard & Poor’s maintained the city’s A+ bond rating.
Mayor Bill Peduto and his staff met with each of the rating agencies in recent weeks to highlight the new administration’s efforts to control the city’s finances. In addition to highlighting economic growth in the city, the administration stressed its success in keeping the city in the state’s program for financially distressed communities, which gives it better opportunities to control union costs and deal with other budget factors.
In its outlook, Moody’s praised the city’s efforts to reduce long-term liabilities. It also cited the strong presence of health and education institutions, a young workforce and the recent end of population declines.
“The city’s long-term plan seeks to control costs, reduce debt and increase pension funding, all while maintaining operating stability and a healthy fund balance,” the firm said. “As the city makes progress in this plan, its finances are likely to strengthen and its debt burden will decrease.”
In a news release, Mr. Peduto lauded the ratings by the agencies. “They confirm that the long-term changes we are making to city spending will deliver a brighter financial future for Pittsburgh for decades,” he said.
Paul Leger, the city finance director, said he was “really surprised” and pleased at the improved outlook from Moody’s and the maintaining of the Standard & Poor’s rating.
“I think [the Moody’s outlook] is really going to have an impact on our bond rating in the next 18 to 24 months,” he said. “Assuming we don’t do something really unexpected [to negatively change the city’s finances], I would not be overly surprised if we received a rating increase in that time.”
An improved bond rating would mean the city could expect to pay lower interest rates and costs on future borrowings, which could save millions of dollars.
Ed Blazina: firstname.lastname@example.org or 412-263-1470.
First Published August 8, 2014 12:00 AM