Standard & Poor's Corp. upgraded $4.31 million of Peabody general obligation debt last week to AA from AA-minus, a spokesman for the rating agency said.

The agency also assigned an AA rating to the city's planned $4.2 million general obligation Series 1992 bonds and affirmed the AAA rating on the city's $21.1 million outstanding GO debt insured by Municipal Bond Investors Assurance Corp. and AMBAC Indemnity Corp.

The agency cited several reasons for the upgrade of the city's debt.

In a release, the agency said responsible fiscal management and strong levels of financial reserves were contributing factors in the upgrade.

As of June 30, the city had reserves of $9.1 million, or 15% of operating expenditures. The agency said this was a particularly significant feat, considering that state aid has dropped 24% since fiscal year 1989.

The release also says the proposed sale of an 86-bed hospital in the city is a sound financial move. Peabody officials have estimated the sale of the facility will bring the city $2.8 million over five years and remove an estimated $1.3 million to $1.8 million a year in operating expenses.

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