WARWICK — Mayor Scott Avedisian announced Wednesday that Standard & Poor’s Global Ratings has raised its long-term rating on the city’s existing general obligation bonds to ‘AA’ from ‘AA-’, citing a strong city economy, a robust fund balance and several promising development projects.
The rating agency has also assigned its ‘AA’ long-term rating to the Rhode Island Health & Education Building Corp.’s series 20171 revenue bonds issued for the city, citing a stable outlook, Avedisian reported in a statement distributed to media this week.
The city’s debt and contingent liability profile, Standard & Poor notes, is very strong, with total governmental debt service at 2.2 percent of total governmental fund expenditures. The report also noted that approximately 77.7 percent of the direct debt is scheduled to be repaid within 10 years.
The agency upgraded the city’s rating due in part to Warwick’s increased budget flexibility, with an available fund balance of 6.1% of operating expenditures and consistently balanced operating results. In its assessment, Standard & Poor’s cites a number of positive factors for the city, including a very strong economy, with access to a broad and diverse metropolitan statistical area; adequate management and budgetary performance; strong cash liquidity, and a strong institutional framework score.
Standard & Poor noted Warwick’s role as one of the state’s leading commercial and retail centers, its proximity to Providence, Interstates 95 and 295, and its central geographic location in the state, as well as serving as host to T.F. Green International Airport. Further, it notes that InterLink intermodal rail station connects the station to the airport and provides residents and other commuters with easy access to Providence and Boston, via commuter trains operated by the Massachusetts Bay Transit Authority.
In addition, the report notes development projects that are underway, including the revitalization of Pontiac Mills, construction of Hyatt Place, the arrival of a new brewery (Proclamation Ale Company) and renovation of existing businesses, as contributing factors to the city’s strong economy.
According to the report summary, Warwick has a projected per capita effective buying income of 122% of the national level and per capita market value of $113,671, and a 4.8 percent unemployment rating in the surrounding county.
Pension and Other Post-Employment Benefits (OPEB) costs, which currently represent 16.2% of city expenditures, may increasingly pressure the budget, according to the summary. In 2015, the city’s OPEB liability, largely legacy pension and healthcare benefits promised to city employees, showed an unfunded liability of $264 million. The city paid $200,000 toward that debt that year.
“For these reasons, we expect that the city’s budgetary performance may decrease relative to fiscal year 2016 and 2017 results,” the report notes.
With the exception of one pension fund, Police/Fire Pension 1, which was unfunded for a number of years, the city’s pensions are the highest rated in the state, Warwick Post reported in 2014.
Police/Fire Pension 1 is now 20 years into a 40-year payment plan, and the remaining plans are the only ones in the state considered “Tier 1”:
Municipal Pension Plan: 70% funded
Fire 2 Pension Plan: 83% funded
Police 2 Pension Plan: 81% funded
“Standard & Poor’s upgrade of our bond rating is great news, and reflects our continued efforts to ensure that our economy is growing, we employ sound budgetary practices, and that we are meeting our financial obligations,” Avedisian said. “This assessment is a reflection on the hard work of our finance team, who work every day to ensure that Warwick remains in a good fiscal position for the future.”