The City of Pittsburgh's debt rating improved yesterday, a development that Mayor Luke Ravenstahl said reflected confidence in its growing bank balance and his proposed $429 million budget.

New York-based Moody's Investors Service boosted its rating on the city's $842 million debt from Baa3 to Baa2, which means the city's financial risk is now about average for a municipality.

Its bonds had been considered junk as recently as late 2004.

"It's encouraging for us as a city to have received this upgrade," the mayor said. "I think it's the result of strong fiscal management over the last couple of years, as well as our 2007 budget."

"It helps when you go out for more debt," because it lowers the cost of the insurance the city must buy, said acting City Controller Tony Pokora. "It's a good sign. We're looking pretty good, for the short term anyway."

Greg Zappala, an underwriter who engineered the refinancing of $243 million in city debt in May, said the upgrade means more investors will be willing to buy bonds issued by the city, which would translate to "a modest savings" to taxpayers.

Moody's, in a press release, said it based the upgrade on a $23.6 million year-end surplus, and expectations of an even better balance this year.

"They're definitely on the way," said Moody's analyst Geordie Thompson. "Their five-year plan does include deficits beyond 2008," he said, but "there's time for them to deal with the problems."

The rating might be better were it not for what Moody's described as "the uncertainty of certain revenues over the medium term, the City's high debt burden, somewhat stagnant economy anchored by a large institutional presence, lack of recent growth in the tax base and below average socioeconomic profile."

Mr. Pokora said the city's three major fiscal problems -- high debt, underfunded pensions, and persistent health care costs -- remain unaddressed. "I think we'll be OK for another three or four years, but then we'll be back in the red again."