Standard & Poor’s Ratings Service has increased its outlook on Indianapolis’ general obligation bonds to “AAA stable” from “AAA negative.”
The rating, which anticipates the city’s ability to repay its debt as far as two years into the future, is the highest issued by S&P.
Prompting the upgrade was the city’s decision to increase income taxes to create a structurally balanced budget for 2008, and a plan to issue pension obligation bonds to bulk up under-funded police and fire pensions.
Indianapolis is likely to see revenue rise over the long haul as incomes-thus taxes-increase, said analyst Eden Perry.
“This was what we wanted to see,” Perry said. “The city is in a much better place than it’s been in the past few years.”
The rating affects approximately $320 million in general obligation debt.
However, Perry said S&P is watching to see how the legislature reacts to the property tax controversy it will confront in the 2008 session. If the General Assembly structures taxes so as to limit reliable revenue streams to local governments, ratings could be downgraded for Indianapolis and other municipalities across the state, she said.