Despite achieving a boost to its credit stature from one rating agency last week, Philadelphia was denied an upgrade late yesterday as Moody's Investors Service confirmed the city's general obligation rating at B.
The credit rating agency confirmed Philadephia's GO bonds while it assigned a Baa rating to the first offering of the Pennsylvania Intergovernmental Cooperation Authority, which acts as an oversight board for the financially troubled city.
The rating came after Fitch Investors Service last week gave the city its first upgrade in 17 years, moving its GO rating to BB from B. The rating agency assigned a BBB-plus to the authority's planned bond issue.
The authority, also known as PICA, plans on issuing about $473 million of special tax revenue bonds the week of June 1, to pay for the city's capital-financing needs and plug budget gaps in fiscal year 1991 through 1993.
In a statement, Moody's said: "The City of Philadelphia's longterm credit outlook remains uncertain."
Moody's vice president and manager Michael L. Johnston said the rating company is concerned that the financially strapped city will not be able to gain necessary union concessions to make workable a five-year financial plan designed by Mayor Edward G. Rendell to balance the city's budget.
Mr. Rendell is calling for stiff union concession as a major part of his proposal, which includes health-care and sick-leave give-backs. Mr. Johnston said the city is still in negotiation with it unions and it is unclear if they will reach a consensus.
Bernard Anderson, chairman of PICA, said, "I think that we're continuing to pay a premium for the past problems of Philadelphia. I think a number of the rating people are waiting to see if this fiscal plan really is going to be implemented."
In a statement, Moody's says that the city's financial condition does not "represent a fundamental risk to PICA's bondholders."
The statement says the city has achieved some level of success in coming up with a plan to help solve its financial problems, which include a $153.5 accumulated deficit in fiscal year 1991, a $94.9 million deficit in fiscal year 1992, that ends June 30.
However, Mr. Johnston said the plan has yet to be implemented, and the rating agency cannot change the city's credit outlook if the plan is not put into action. Mr. Johnston said if the city does not get the union concessions, it will have to implement significant layoffs.
Standard & Poor's is expected to issue a rating today, an official at the agency said. Standard & Poor's rates the city CCC.
