Moody's Investors Service late Tuesday downgraded West Warwick, R.I.'s general obligation bond rating to Baa2 from Baa1, while keeping a negative outlook.
Moody's cited the town's significant underfunding of annual pension contributions and school fund deficit. The move affects $47 million in debt and puts the 29,000-population city two levels above junk.
"The negative outlook reflects our belief that the town will continue to face challenges to making its full pension contributions and reducing its pension," Moody's said in a statement.
The rating, said Moody's, also incorporates the town's large pension and other post-employment benefits, or OPEB, liabilities, a moderately-sized tax base with average wealth and income levels and manageable debt.
Messages seeking comment were left with the five members of the Warwick Town Council.
Fitch Ratings in June lowered West Warwick to BBB-minus, saying its estimated funded pension ratio had dropped to 22%, based on Fitch's 7% rate of return.
Moody's lowered eight Rhode Island communities — including West Warwick from A3 to Baa1 — in 2011.