Philadelphia borrowed an additional $200 million last week, prompting the three major bond-rating agencies to review the city's fiscal prognosis just in time for incoming Mayor Michael Nutter.
Standard & Poor's (rating "BBB") says the city now owes an average $5,000 per resident -- "very high" -- to pay for past projects such as the Eagles and Phillies stadiums, Mayor Street's slum clearance plan, and a 1990s attempt to bail out a city retirees' pension fund. It notes future budgets are based, in part, on yet-unbuilt casinos, payments from the troubled Philadelphia Gas Works, and flat wages for city workers in next year's contract negotiations.
Moody's Investors Service ("Baa1"): Philadelphia shows "improving, although still weak, demographic and economic trends, modest property-value growth, and a heavy burden of tax-supported debt."
Fitch Ratings Inc. ("BBB+"): The city's plan to keep cutting wage and business-privilege taxes "will require significant cost-cutting measures and revenue enhancements." Fitch analyst Jessalyn Moro commented to us further: "Philadelphia's rating is far below average. The debt load is among the highest." She said the "only real option" was to keep paying it off. The city is so deep in debt, it cannot borrow much more on a net basis: "They are pretty close to the limit."
Comments (4)
The city has to keep a multi-million-dollar reserve so it can handle "lumpy" expenses like plowing snow, fighting refinery fires, and paying salaries between real estate tax collections. The size of that surplus can vary a lot from year to year and within a year. If the budget balanced exactly -- if there was no reserve -- the city would be considered very vulnerable and the credit ratings would be a lot worse.
Posted by Joe DiStefano | December 4, 2007 4:21 PM
Posted on December 4, 2007 16:21
Well, in that case, take some of the $250 million surplus this year and pay DOWN THE DEBT!
Why is this so hard to understand?
Posted by Mike | December 4, 2007 3:55 PM
Posted on December 4, 2007 15:55
Yes, believe you're right. Will check. But for the record, budget surplus/deficit and standing debt are two different things. You can take out a fat mortgage and home equity loan, which increases your debt, even while you get a raise at work and bring home more money each week.
Posted by Thomas Ginsberg | December 4, 2007 12:00 PM
Posted on December 4, 2007 12:00
Wasn't it recently reported that Philly had tens of millions in surplus dollars from the last fiscal year? Has that money already been spent? If so, on what?
Posted by Marcus F | December 4, 2007 11:31 AM
Posted on December 4, 2007 11:31