Moody's upgrades Pittsburgh bond rating
Moody’s Investors Service upgraded the outlook on Pittsburgh’s bond rating last week, following their first meeting with Mayor William Peduto and other administration officials.
Moody’s moved the city’s rating up from A1 (Stable Outlook) to A1 (Positive Outlook). They wrote:
“The positive outlook reflects the steps the city has taken to reduce its long-term liabilities. 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. As the city makes progress in this plan, its finances are likely to strengthen and its debt burden will decrease.”
The announcement followed further good news from Standard & Poor’s that it is maintaining the city’s A+ bond rating. The moves by the ratings agencies ensure the city will not incur any unexpected costs for insurance or raise any other planned costs of issuance of the upcoming $50,000,000 in bonds that have been approved by city council and are expected to be issued by August 28.
Rating agencies typically wait to see at least one year of performance by a government before changing bond ratings. This summer the mayor personally hosted Moody’s and Standard & Poor’s and led their delegations on a tour of several development sites.
“I want to thank Moody’s and Standard & Poor’s for these reports. They confirm that the long-term changes we are making to city spending will deliver a brighter financial future for Pittsburgh for decades,” Mayor Peduto said.
The mayor made the following points in his meetings with the agencies:
• His success in remaining under Act 47 oversight by the state allows the city to have a five year fiscal plan that has the force of a city ordinance. It was developed cooperatively by the Mayor’s Office, city council and the Act 47 team. There is broad agreement that the plan will benefit the city going forward by being a permanent structural roadmap to recovery for the city’s financial health.
• The city’s plan to control debt costs through the “debt cliff” ensures the city will see between $35 and $40 million in reductions of the city’s payments on borrowed money (bonds) in 2019. The city also plans to comply with Act 47 recommendations for increased funding for the pension fund to continue to bring it closer to full funded status.
• Control of personnel costs through a 2015 wage freeze and restricted contract bargaining will prevent large increases in the cost of the city workforce. Personnel is the largest cost of government and these costs (along with cost of benefits) must be controlled if the city is to retain control of its finances.
• Cooperation among government units, working with Allegheny County Executive Rich Fitzgerald, closer working efficiencies with the city’s authorities and monitoring of effective performance by departments will all help to create economies of scale and make administrators accountable for departmental performance. Frequently governments have intentions and promises of fiscal control going forward. But Pittsburgh is in the desirable position of having an agreed upon, institutionalized plan for its finances for the next five years and that detailed plan has the force of law.
This should provide a measurable evaluation instrument for the rating agencies for the next several years. The city will continue to inform the rating agencies of our progress in meeting the plan.
A copy of the full Moody’s report is at: http://apps.pittsburghpa.gov/mayorpeduto/Moody-s_8-14_rating_A1-Positive.pdf