PHILADELPHIA — S&P Global Ratings upgraded the City of Philadelphia to its highest combined credit ratings in decades. The new ‘A+’ rating with a long-term Stable outlook, is the second ratings upgrade during Mayor Parker’s Administration, following Fitch’s upgrade in June. Credit ratings are a key factor in determining the interest rate the City pays on its infrastructure borrowing.
In announcing the improvement to the City’s Rating, S&P recognized “Philadelphia’s demonstrated long-term commitment” to fiscal stability “including making annual additional payments towards its pensions and rebuilding its budget stabilization reserve (BSR) despite economic and fund balance fluctuations.” S&P also noted the City’s role as the economic anchor of the region.
“I am delighted by the news that the City of Philadelphia’s credit rating has been upgraded to “A+” – our highest credit rating in decades,” said Mayor Cherelle L. Parker. “This upgrade is the product of the hard, sustained work of every member of our City’s finance and budget teams, under the leadership of Finance Director Rob Dubow. 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 for city projects, a savings for taxpayers. This credit rating upgrade proves that we’re moving in the right direction in Philadelphia.”
S&P noted that the City could be further upgraded if it can maintain its combined reserve balances and continue its long-term trend of sustained progress on pension funding. While noting the City’s recent progress in improving both poverty and unemployment, S&P cited the City’s weakness in socioeconomic metrics relative to peer cities as a concern. This underscores the importance of Mayor Parker’s targeted investments towards making Philadelphia the Safest, Cleanest, Greenest Big City with Access to Economic Opportunity for All.
The City has been rated in the ‘A’ category by all three rating agencies since 2013 but the S&P upgrade means that the City has its highest combination of ratings in more than four decades. Moody’s last upgraded the City’s rating from ‘A2‘ to ‘A1’ in April 2023 and Fitch upgraded the City’s rating from ‘A’ to ‘A+” in June 2024.
“We are pleased to see our commitment to the City’s fiscal health and disciplined pension funding efforts recognized through this latest rating action,” said Jackie Dunn, City of Philadelphia Treasurer.
The City ended Fiscal Year 2024 with a $942.9 million unaudited fund balance or 15.5 percent of revenues, down slightly from the audited Fiscal Year 2023 fund balance of $981.6 million. The City also made a $42 million deposit to the Budget Stabilization Reserve Fund in Fiscal Year 2024, bringing the total reserve balance up to $113 million. Part of the reason for the stronger ending Fiscal Year 2024 balance was due to temporary items such as remaining federal stimulus funds and delays in hiring. In Fiscal Year 2025, the City projects that fund balance will drop to $642 million (9 percent of revenues), and the City deposited an additional $58 million in the Budget Stabilization Reserve 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, up from the mid-40s six years ago, the highest level in more than two decades, and the fund’s actuary projects that it will be fully funded within a decade.
The ratings action came in advance of the City’s most recent bond sale. Philadelphia closed on its third transaction under the Neighborhood Preservation Initiative (NPI), issuing $150 million in Social Bonds to invest in affordable housing, commercial corridors, and small business revitalization last month.
More information about the City’s ratings is available online.