Moody's Investors Service said it has downgraded to Baa2 from Baa1 the rating on the town of Somers, Wis.'s general obligation debt.
Concurrently, it assigned a negative outlook. The downgrade and negative outlook apply to $20.1 million in GO debt outstanding.
The Baa2 rating reflects persistently negative reserve levels despite a modest unaudited surplus in fiscal year 2014. The town nearly expended their entire fund balance in fiscal year 2011 to finance a town hall expansion, and reserves continued to fall to negative levels in subsequent years due to expenditures coming in over budget.
Although management is hopeful that the town will recover a positive fund balance in fiscal year 2015, strict levy limits restrict town management from implementing material revenue enhancements.
In addition, town management has yet to implement significant expenditure reductions in an effort to replenish reserves. The rating is also based on the town's elevated debt burden, declining assessed values, and above average socioeconomic profile.
