PITTSBURGH, PA (February 22, 2021) Two bond rating agencies reaffirmed the City of Pittsburgh’s AA- credit rating last week in advance of a $55 million bond issue, and praised the City’s management of its budget before and during the COVID-19 pandemic.
The City’s fiscal planning and resiliency strategy over the past seven years turned a structurally deficient budget into a model of fiscal strength. The model’s success created a $120 million reserve fund that allowed the city to weather the COVID economic crisis. Today, the success of the city’s financial management is being recognized by two independent financial rating agencies, upholding the strong credit ratings that allows the city to borrow capital budget funds at a better rate to save taxpayers money.
S&P Global Ratings said the City’s financial outlook is stable and with an improving revenue environment said it could rebuild the reserves it used to offset budget losses during the pandemic. Fitch differed, saying it will be challenging to build up those reserves and said the financial outlook is negative due to budget unknowns this year.
The S&P report issued February 18 said in part:
“Overall, we believe the financial progress made by Pittsburgh prior to the recent recession positioned the city well to absorb the negative effects of the pandemic while maintaining operations. Pittsburgh used reserves in 2020 to cover revenue losses and increased expenses without major service disruptions.
. . . Given an improving revenue environment and current federal aid proposals, combined with the city's commitment to make expenditure reductions if needed, we do not expect the city's finances will weaken significantly in 2021, and we believe reserves could even improve by year end.”
Fitch Ratings said this in its February 18 report:
“The 'AA-' GO ratings and IDR incorporate the city's very strong operating performance as evidenced by the recent buildup of a high reserve cushion and its significant independent legal ability to increase revenues. These strengths are offset to some degree by retiree benefit and other expenditure pressures that leave the city with just adequate ability to control spending and a pace of spending growth that will likely require ongoing budget management. . . The Negative Outlook reflects Fitch's belief that the city may be challenged to rebuild reserves that are needed to offset near-term revenue declines sufficiently to maintain its high level of fundamental financial flexibility.”
In November Mayor William Peduto proposed a $564 million operating budget that did not include tax increases but warned that without federal aid to offset losses due to COVID-19 —including spending down its $120 million fund balance — the City would be forced to lay off more than 600 workers by July 1.
Congress is close to voting on a $1.9 million COVID-19 relief package proposed by President Biden that includes relief for state and local governments.