Standard & Poor’s Ratings Services has upgraded its municipal bond rating outlook for the city of Portland from “stable” to “positive,” while Moody’s Investors Service reaffirmed its previous “stable” outlook for the city’s financial health.

Moody’s assigned Portland bonds its second-highest rating of Aa1, which denotes a high quality investment with very low credit risk, while Standard & Poor’s gave the bonds its third-highest rating of AA, denoting a very strong capacity to meet its financial commitments.

Much like a consumer’s credit score, a city’s bond ratings determine its ability to borrow money affordably. Portland’s moderately high rating reflects the fact that it is an anchor of the regional economy with a diverse tax base and stable financial position, Moody’s said in its report, issued Thursday. However, it failed to receive the highest rating because of potential credit challenges such as high living and business costs, and state-mandated caps on real estate tax increases that limit the city’s ability to raise additional revenue, it said.

Moody’s said its stable outlook reflects an expectation that Portland’s “new but experienced management team will maintain the (city’s) healthy financial position” with careful management of expenditures despite budgetary pressures from rising benefit costs and reduced state aid.

Standard & Poor’s said its increase to a positive outlook and AA rating is partly the result of an upgraded score on the financial management portion of its assessment, specifically citing “very strong” management, with strong financial policies and practices. It also noted Portland’s strong economy, budgetary flexibility and liquidity of investments.

However, it noted that city officials plan to issue roughly $90 million to $120 million in additional debt over the next two years for capital improvements, mostly related to the city’s combined sewer overflows. It described Portland’s debt and contingent liability as “adequate.”

Portland officials reacted positively to the rating services’ reports.

“We’re very proud of the ratings and believe they are reflective of the strong financial position, strong financial policies, and positive trajectory of the City overall,” city Finance Director Brendan O’Connell said in a news release. “A strong credit rating is essential to our city’s health and has a significant impact on many of our current and future debt-related costs.”

 


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