PETERSBURG, Va. -- Petersburg city leaders marked the end of 2019 by announcing its bond rating status had been increased, while its outlook remained positive.
S&P Global Ratings said Wednesday that it increased “its long-term rating and underlying rating (SPUR) on the City of Petersburg, Va.’s general obligation (GO) bonds outstanding to ‘BBB-‘ from ‘BB+’.”
“The upgrade reflects our view of Petersburg’s commitment and continued progress toward restoring financial stability and rebuilding reserves,” said S&P Global Ratings credit analyst Timothy Barrett.
S&P’s website describes a “BB“ rating as a speculative grade where entities are “less vulnerable in the near-term but faces major ongoing uncertainties to adverse business, financial and economic conditions”, where as a “BBB” rating is the first of the investment grades where entities have “Adequate capacity to meet financial commitments, but more subject to adverse economic conditions”. Less vulnerable in the near-term but faces major ongoing uncertainties to adverse business, financial and economic conditions.”
“We are simply here to say that we are on the right path,” said Petersburg Mayor Sam Parham when announcing the upgrade at a news conference on Wednesday. “Despite the things that you may hear about the city not moving in the right direction, this is proof that we are heading in the right direction with the leadership team that we have, with the council we have here at play and we’re going to keep striving until we get back to that ‘A’ rating.”
In a news release about the increase, S&P said Petersburg had “taken numerous key steps toward financial recovery over the past two years, including fully repaying past-due obligations, assembling a new permanent management team, and strengthening budgetary flexibility and liquidity, supported by some recently adopted financial policies.”
It added that its view of Petersburg’s credit quality is reflected by these characteristics: a “weak economy, historically weak management conditions, adequate budgetary performance, very weak budgetary flexibility, adequate liquidity, adequate debt and contingent liability profile, and a very strong institutional framework score.”
The increase marks another step away from a financial crisis that gripped the city for years.
“Historically, the weak economy affected us, but some of our decisions also affected us,” said City Manager Aretha Ferrell-Benavides, who added the city is still working to restore its financial stability. “We have fully paid all of our obligations, we’ve got a management team together now and that new management team has been focused on not only stabilization, but of growth and continuing to implement financial policies.”
S&P said it kept its outlook as positive for the city because of its recent success in restoring financial operations.
The website said the outlook “assesses the potential direction of a long-term credit rating over the intermediate term”, typically between six months to two years. It added that a positive outlook means that a rating may be raised.
For Petersburg, it said if the city "continues to materially improve liquidity and reserves through balanced and sustainable financial operations, we could raise the rating, potentially by multiple notches depending on the pace of recovery.”
But, the agency added “if the city fails to implement its financial recovery plan and reverts to imbalanced budgets and reduced liquidity, or if audited fiscal 2018 results materially differ from unaudited actuals provided to us, or if projections were to materially weaken, we could revise the outlook to stable.”
A stable outlook means that the city’s bond rating is unlikely to change.