Woonsocket, R.I., reeling from yet another downgrade, may not be able to avoid bankruptcy and could run out of cash in April, one lawmaker said Friday.
His comments came one day after Fitch Ratings downgraded the city’s general obligation bonds to a junk-level BB-minus from BBB-minus, while maintaining a negative watch.
Woonsocket’s school district has a $10 million school-fund deficit, which includes a $2.7 million carryover from the last fiscal year.
“How to do we avoid bankruptcy? At this point, I have to be honest and say I’m not really sure if we can,” Rep. Jon Brien, D-Woonsocket, chairman of the Rhode Island House Municipal Finance Committee, said on Rhode Island Public Radio’s Political Roundtable show.
“I don’t now how you can make it up in such a short amount of time. There’s a major cash crunch for the city. It won’t be able to pay its bills or pay its wages at the end of next month,” Brien added.
There is insufficient time to enact a supplemental tax bill in time to raise the cash, he said.
“And we can’t borrow because at this point, the borrowing ability of the city has become toxic, so our situation is very dire, and at this point I’m really not sure what we can do in a timely enough fashion,” Brien said.
Fitch on Thursday said Woonsocket “has very limited expenditure-reduction options available to address the imbalance, and the tax base is stressed.”
The city itself appeared headed toward fiscal stability when it issued $11.5 million of deficit financing bonds last March. But the school fund balance ended the year nearly $3 million in the hole. According to Fitch, city management hinged the deficit largely to school personnel spending without corresponding resources to cover the expenditures.
In January, Moody’s Investors Service lowered Woonsocket’s rating to Ba2 from Ba1, affecting $225 million of parity debt.
Woonsocket, with a population of 41,000, sits 15 miles north of the state capital, Providence.
It is one of several distressed communities in Rhode Island. Central Falls filed for Chapter 9 bankruptcy protection in August and East Providence is under a budget review commission, the second stage of intervention under Rhode Island’s three-step system.
Providence Mayor Angel Taveras warned that his city would run out of money at the end of June.