Eleven days after it placed Woonsocket, R.I., on review for downgrade, Moody’s Investors Service lowered the city’s long-term general obligation rating to Ba2 from Ba1, affecting $225 million of parity debt.
In an announcement Tuesday, Moody’s said the move “reflects a continued deterioration of the city’s school operating financial position.”
Last month, Woonsocket’s school department acknowledged a budget deficit of nearly $3 million.
Moody’s maintains a negative outlook.
“It is very distressing in many ways because a lot of progress that was made has certainly been undermined by this school district,” Mayor Leo Fontaine told the City Council Tuesday night, according to the Woonsocket Call. Messages seeking comment were left with Fontaine on Wednesday.
Woonsocket, which has a population of 41,000, is one of several distressed communities in Rhode Island. Eight communities, including bankrupt Central Falls, received downgrades from Moody’s last year.
State revenue director Rosemary Booth Gallogly has warned of possible fiscal oversight for Woonsocket. Central Falls is under receivership and East Providence is under a budget review commission, the second stage of intervention under Rhode Island’s three-step system.
In a report last month, Moody’s said Rhode Island municipalities face intensified credit pressure and possibly more downgrades in 2012.
State lawmakers are weighing legislation that would enable cities and towns to overhaul municipally administered pension plans, akin to the changes made at the state level.
Moody’s also downgraded the city’s underlying rating on the Rhode Island Health and Education Building Corp. bond issue, Series 2009E, to Ba2 from Ba1, also with a negative outlook.
While Moody’s identified city financial management as a strength, as well as the willingness to increase revenue amid a difficult economic environment, it also said Woonsocket’s challenges included “historic and ongoing deficits in school operations,” unpredictable revenue forecasts that include possible further state aid cuts, and increasing fixed costs, including debt service and pension obligations.
According to a report from the state auditor general’s office, Woonsocket’s pension plan is 69.1% funded.
