Woonsocket Gets Downgraded By Moody's

Woonsocket Gets Downgraded By Moody's

Could Woonsocket join Central Falls and East Providence? Moody's downgrade is not good news for the Blackstone Valley City.

Moody's Investors Service has downgraded the City of Woonsocket's underlying General Obligation rating to Ba2 from Ba1. Moreover, they have changed the outlook to negative. 

RATINGS RATIONALE

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The downgrade to Ba2 rating reflects a continued deterioration of the city's school operating financial position despite the recent issuance of deficit bonds due to multiple deficits in previous years. The negative outlook reflects the city's near-term credit stress due to the continuation of deficits in the school unrestricted fund and ongoing underfunding of the locally administered pension plan.

STRENGTHS

-Improved City financial management practices and oversight

-Demonstrated willingness to increase revenues in a difficult economic environment

CHALLENGES

-Historic and ongoing deficits in school operations

-Continuing lack of revenue predictability, including the potential for an additional state aid reduction

-Increasing fixed costs, including debt service and pension obligations

OUTLOOK:

The negative outlook reflects Moody's belief that the continuation of deficits in the school unrestricted fund and ongoing underfunding of the locally administered pension plan will provide near term credit stress.

What would make the rating move - UP

- Structurally balanced operations and improved reserve liquidity levels

- Significant reductions in debt burden

What could change the rating - DOWN

- Continued structurally imbalanced operations in the General or School Unrestricted Funds

- Return to a reliance on cash-flow borrowing

- Significant increases in debt burden