Philadelphia fiscal stability debated after Moody’s offers ‘negative’ outlook

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Philadelphia Finance Director Rob Dubow testifies before City Council Wednesday. (Tom MacDonald/WHYY)

Philadelphia Finance Director Rob Dubow testifies before City Council Wednesday. (Tom MacDonald/WHYY)

Philadelphia City Council grilled members of the Kenney administration Wednesday about the state of the city’s finances.

A new credit report by Moody’s Investor Services has revised Philadelphia’s outlook from “stable” to “negative” while still affirming the city’s A2 rating (a high-medium grade) on its $1.5 billion in outstanding debt.

That has the Council Committee on Fiscal Stability worried.

Finance director Rob Dubow said the city’s fund balance will drop from $105 million to $47 million over the next few years.

“Those are really low numbers, they are low as a percent of our overall revenues,  that $47 million is only about 1 percent of our overall revenues,” he said.

And, although the cushion is thin, it’s “not a dangerous situation,” Dubow said.

“It’s very low compared to other jurisdictions, it means our financial health compared to other jurisdictions is probably weaker,” he said. “And that’s why the ratings agencies have us at solid investment quality but lower than all but two of the largest 20 cities in the country.”

The negative outlook reflects Philadelphia’s inability to achieve structural balance resulting in a continued weakening of reserve levels, Moody’s said.

“While the city conservatively budgets and revenues have been on an upward trend, expenditures continue to outpace revenue growth,” the analysis said. “Going forward, any additional declines in reserves beyond current projections, will result in negative credit pressure.”

Council members Wednesday discussed ways to bolster revenues, including increased collections of  delinquent taxes and possibly trimming expenses.

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