RI has 2 of 7 “Junkiest Cities”
Think Greece and Spain are drowning in debt? Look a little closer to home. Seven U.S. cities recently had their municipal bonds downgraded below investment grade. Their debt is now junk, considered more worthless than that of the so-called PIIGS.
“America’s short-term budget crises, long-term growth perspectives and needs for austerity are similar [to Greece],” said Matt Fabian, managing director at Concord, Mass.-based consulting firm Municipal Market Advisors.
Last quarter, Moody’s Investor Services declared the debt issued by Harrisburg, Penn., and Woonsocket, R.I., to be junk, or below-investment grade. Meanwhile, Fitch Ratings currently has four other cities in the basement — Detroit and Pontiac, Mich.; Harvey, Ill.; and Littlefield, Texas — while Standard and Poor’s has one — Central Falls, R.I.
These seven cities are struggling under the weight of the recession. Residents are unemployed, and without a job, they can’t pay their property taxes, which are the foundation of local budgets. And cities’ operating expenses continue to soar; pension and debt payments don’t go away. And as their credit gets worse, the cost of borrowing for municipal projects — such as sewer plants and roads — just gets more expensive.
“The fiscal stress is severe in cities around the country, and it’s likely to stick around for at least a couple of more years,” said Chris Hoene, director of policy and research at the National League of Cities.
2 of 7 from little Rhody? Ignomious distinction to say the least and reflective of deep cultural and political problems that we’re all familiar with.