Moody's Investors Service said it has downgraded the town of Templeton, Mass.'s general obligation rating to A2 from A1 and assigned a negative outlook.
Concurrently, Moody's has removed the rating from review, as the downgrade of the rating resolves the earlier action.
Moody's placement of the rating under review, with direction uncertain on June 26, 2013, was prompted by a lack of sufficient 2012 financial information, which has since been received.
The town's unlimited and limited tax GO bonds are secured by its GO unlimited and limited tax pledge respectively, subject to the commonwealth of Massachusetts' (Aa1 stable outlook) Proposition 2 ½ tax levy limitation. As of June 30, 2012, the town has approximately $6.9 million of unlimited tax GO bonds and $4.3 million of limited tax GO bonds outstanding.
The downgrade to A2 reflects the town's deteriorating financial position, which is driven by rising expenditures and annual transfers to the sewer fund to pay for ongoing projects.
This pressure is demonstrated by the town's falling general fund balance levels, which declined by 40% from 2008 to 2012. In addition, the town's new management team may not be able to reverse these trends expeditiously given their limited knowledge of the town's finances.
The A2 rating also considers the town's modest-sized tax base, manageable debt burden, and below-average socioeconomic indices.
The negative outlook incorporates Moody's expectation that the town's reserve position will continue to diminish given ongoing operating pressure and management's lack of clear plans to address this pressure.