Moody’s Investors Service late Thursday downgraded the general obligation rating of North Providence, R.I., to Baa2 from Baa1. The outlook remains negative.

The move, which affects $38 million of outstanding debt, marks the latest rating action in Rhode Island, where Central Falls filed for Chapter 9 bankruptcy protection on Aug. 1.

According to Moody’s, the new rating reflects the town’s “extremely narrow financial position,” characterized by a trend of sustained negative general fund balance and constrained liquidity that has triggered deficit spending.

The rating also incorporates a reduction in taxable values on the town’s moderately sized tax base, as well as manageable debt, Moody’s said.

Moody’s also cited the town’s consistent underfunding of police pensions and a significant unfunded liability, as well as a reliance on cash-flow borrowing and tax-base decline.

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