Things are going from bad to worse for the city of Providence, and its financial troubles. The city's bond rating has been downgraded again.
Mayor Taveras shocked a lot of people weeks ago when he suggested the city may be headed to bankruptcy. This won't help. Moody's investors service has now downgraded Providence's bond rating from A-3 to baaa1. It's no secret all of this has to do with the city's current financial crisis. In its report, Moody's suggested that additional revenue may help ease the problem, but things such as raising people's taxes or cutting benefits are not popular options.
Here's what could be the immediate impact: First and foremost, a lower bond rating will negatively affect the city's ability to borrow money, especially funds for construction and renovation projects at city buildings and schools. Second, it puts the city's bonds just two-steps away from "junk bond" status, and that means investors may be very leary about putting any more money into the troubled capitol city. Lastly, the blame for this is being put on the city's estimated 20-million dollar deficit for the current fiscal year, which ends on June 30th.
Perhaps the biggest surprise in the report dealt with Mayor Taveras and his efforts to get police and fire retirees to give up their cost of living increases. That was the subject of a very contentious meeting just over three weeks ago, where the unions pushed back hard against the mayor. The report says Providence cannot count on the revenue from those cost-of-living increases because even if the city forces unions to take the pension cuts, there are likely to be lawsuits and that could tie the issue and money in court for years.