Fitch Ratings has revised its outlook on West Warwick, R.I.’s general obligation bonds to negative from stable, while affirming its rating on $13 million of debt at BBB-plus.
Fitch cited uncertainty about the town’s progress towards alleviating its unfunded pension and other post-employment benefit liabilities.
“Although pension contributions were increased notably for fiscal 2013, contributions continue to remain below actuarially required levels,” Fitch wrote in a report. “Future annual pension costs could compound to potentially unmanageable levels given tax levy restraints.”
The funded ratio for the town-operated plan plummeted to 26% as of July 2010, down from 48% in 2005. Using Fitch’s assumed 7% rate of return, the funded ratio drops to 24%, according to the rating agency.
The Pew Center on the States considers 80% an acceptable threshold.
