Bonds are backed by city’s ad valorem taxing power
San Juan’s latest debt sale drew a ‘BBB+’ rating with a Stable Outlook from Fitch Ratings, a signal that the capital city’s fiscal turnaround continues to hold even as long‑term demographic and economic pressures remain a drag on credit quality.
Fitch assigned the ‘BBB+’ rating to the municipality’s $125 million general obligation bonds, Series 2026, and affirmed the same rating for San Juan’s Issuer Default Rating. The bonds are backed by the city’s unlimited ad valorem taxing power.
The agency credited the administration with restoring financial stability after years of volatility stemming from Puerto Rico’s broader fiscal crisis, hurricanes, and the pandemic. San Juan has posted consecutive surpluses and built reserves well above Fitch’s assumed minimum. The city closed fiscal 2025 with a fund-balance-to-expenditure ratio of 46.4%, compared with the 5% threshold Fitch uses for its financial resilience assessment. “The current administration has improved financial operations, producing surpluses and implementing a successful pay-go capital program,” Fitch wrote.
Still, the rating sits two notches below the model‑implied ‘A’ due to structural weaknesses that Fitch says weigh heavily on long‑term credit quality. San Juan’s population trend is among the weakest in the national local‑government portfolio, with a median 10‑year annual decline of –0.8%, and its median household income ranks at the 0th percentile of Fitch‑rated municipalities. The agency assigned an ESG Relevance Score of ‘5’ for demographic trends, noting that two decades of population loss remain a key driver of the rating.
San Juan’s long‑term liability burden is assessed as midrange, with liabilities to governmental revenue and carrying costs showing deterioration but still comparable to national peers. Fitch also highlighted the city’s diversified economic base—government, trade, transportation, professional services, and tourism—which was supported by nearly 7 million visitors in 2024.
Future rating movement will hinge on fiscal discipline and structural improvements. A downgrade could follow sustained reserve depletion, rising liabilities, or continued demographic decline. An upgrade would require maintaining reserves above 10% of spending, materially reducing long‑term liabilities, improving household income levels, or strengthening infrastructure to support economic growth.
The rating committee met on June 30, 2026.
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