PHILADELPHIA – The City of Philadelphia’s credit rating has been upgraded by Fitch Ratings to ‘A+’ from ‘A’ with a long-term Stable outlook, giving the City its highest combination of credit ratings in decades. The positive rating action is the first during Mayor Parker’s Administration and signals recognition of the continued improvements in the City’s finances. Credit ratings are a key factor in determining the interest rate the City pays on its infrastructure borrowing.
In announcing the change to the City’s Issuer Rating, Fitch cited the City’s healthy General Fund reserves, strong and consistent financial management, and continued improvement to the health of its pension fund. Fitch also noted the City’s diverse economy which provides resiliency through market cycles. This is the City’s first rating under Fitch’s new U.S. Public Finance Local Government Rating Criteria. Fitch previously upgraded the City in July 2022, noting similar progress.
“I am delighted by the news that the City of Philadelphia’s credit rating has been upgraded to “A+” – our highest group of credit ratings in decades,” said Mayor Cherelle L. Parker. “This upgrade is the product of the hard, sustained work of every member of our finance and budget teams, including the Treasurer’s Office, Finance Director Rob Dubow, and everyone on these teams. It’s also the result of our improving Pension Fund, which is 62.2 percent funded, its highest level in two decades. Our economy is diverse and improving – another positive indicator. Higher credit ratings mean lower interest costs when Philadelphia borrows money, a savings for taxpayers. This credit rating upgrade proves that we’re moving in the right direction in Philadelphia.”
Fitch noted that in addition to the City’s maintaining healthy General Fund reserves, other factors that could contribute to the rating being further upgraded would be sustained improvement in economic fundamentals, including population, employment, and economic. This underlines the importance of Mayor Parker’s targeted investments towards making Philadelphia the Safest, Cleanest, Greenest Big City with Economic Opportunity for All.
“We are pleased to see our commitment to the City’s fiscal health recognized through this latest rating action,” said Jackie Dunn, City of Philadelphia Treasurer. “The City’s financial management team has really focused on making critical investments, building reserves, and improving the health of our pension fund.”
The City ended Fiscal Year 2023 with a $982 million audited fund balance, its highest ever. In addition to this record fund balance, the City also made a $65 million deposit to the rainy-day fund to build reserves. The Fiscal Year 2024 estimated fund balance is approximately $537 million or nine percent of revenues. The City will also make an additional $42 million deposit to the rainy-day fund. The City has also made significant progress improving the health of the pension fund. The pension fund is currently 62.2 percent funded on an actuarial basis, the highest level in more than two decades, and the fund’s actuary projects that it will be fully funded within a decade.
The City has been rated in the ‘A’ category by all three rating agencies since 2013, but the Fitch upgrade means that the City has its highest combination of ratings in more than four decades. S&P Global Ratings maintained its ‘A’ rating with a Positive outlook and Moody’s Ratings affirmed the current ‘A1’ rating with a Stable outlook. Moody’s previously upgraded the City’s rating from ‘A2‘ to ‘A1’ in April 2023.
The rating actions come in advance of the City’s upcoming bond sale. On Thursday, June 13, Philadelphia will price $100 million in bonds for the Rebuild program to invest in parks, recreation centers, libraries across Philadelphia.
More information about the City’s ratings is available online.