Providence Credit Rating Downgraded

Another financial blow to Providence. The city's credit rating was downgraded. Fitch lowered the capital city's rating three notches to just above junk status.         

Now that the credit rating is close to junk bond status, the mayor said people really need to take this seriously. 

Mayor Taveras said the bond rating's nose dive from “A” to “BBB” should be a final wake up call for the capital city.

“To be lowered three ratings is difficult,” said Mayor Taveras, “We certainly expected to be lowered, but to go down three notches as we did is certainly difficult and it's just a reminder of the serious and difficult work we have ahead of us.”

Providence is set to run out of money by the end of June. The mayor has said all along the 22 million dollar budget gap could force the city into bankruptcy.

“The bond rating makes it a lot more difficult to borrow,” said Taveras, “I think it should really alert people that what I've been talking about is real and we need to make systemic structural changes to address this.”

Mayor Taveras wants to close the gap by freezing city retirees' COLA benefits and getting tax exempt universities and hospitals to kick in their share. But economics professor Leonard Lardaro said the mayor hasn't been successful so far and he's running out of time.

“This is coming to a head,” said Lardaro, “It might not be now. Maybe you still have some temporary expedients like raise tax rates or get some concessions but the long term problem still remains.”

Lardaro said bankruptcy is likely now more than ever. And he said if it comes to that the entire state will suffer.

“I do think the state's going to have to be involved because we can't let our biggest city, our capital city default,” said Lardaro, “That would not be good. It would hurt. It would hurt the rest. This would also have ripple effects to other cities and towns for their bond ratings eventually.”

That, he said could push Rhode Island into another recession.

One of the solutions that's been tossed around is a property tax increase, which Mayor Taveras said is still a last resort.