S&P praises city, raises bond rating from A to A-plus

It notes income growth, lower unemployment


June 23, 2000|By Gerard Shields | Gerard Shields,SUN STAFF

Saying that the city economy is strengthening, Standard & Poor's has increased Baltimore's bond rating from A to A-plus.

The rating increase means the city will have to pay less interest on the bonds that are sold to raise revenue for its projects. The report is the city's second consecutive upgrade from national rating agencies.

In April, Moody's Investors Inc. upgraded the city's fiscal forecast from negative to stable. For the past two years, Baltimore has been fending off potential bond rating downgrades because of projected budget deficits.

"That's good news for us," Mayor Martin O'Malley said yesterday of the new grade.

Among the city improvements noted by Standard & Poor's is a slowing of the annual average population decline to 2 percent.

The report also pointed to the Johns Hopkins University, the University of Maryland, Baltimore and Loyola College as stable anchors in an economy shifting from a manufacturing base. The colleges and related medical institutions are helping to bring to the city small technology companies.

Standard & Poor's also noted the city's lower unemployment rate, which dropped from 10.7 percent in 1993 to 7.4 last year. The figures are still well above the national rate of 4.2 percent, but city income has grown 27 percent over the past five years, outpacing other regions in the state, the analysis said.

"The improvement has been very gradual and very slow, but they're all positive steps," said LaVerne Thomas, one of two Standard & Poor's analysts reviewing the city.

Standard & Poor's also lauded the city for tearing down its high-rise public housing projects, which are slated to be replaced by 4,158 low-rise units in coming years.

The analysts also commended the city for sound budget management. The improving city economy has increased city income tax receipts that have helped cut into the projected deficit. "They're holding the line," Thomas said of city spending.

Baltimore now has an A1 Moody's rating and A-plus with Fitch IBCA. The highest bond rating of all three rating agencies is AAA.

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