WOONSOCKET â€“ Citing continued erosion of the school departmentâ€™s finances, Moodyâ€™s Investor Service downgraded the cityâ€™s bond rating from Ba2 to B2 Thursday, three notches deeper into junk territory.
Moodyâ€™s said the city remains on watch for further downgrades. Meanwhile, Fitch Ratings, which already pegs the cityâ€™s bond rating at a junk-level BB-, is scheduled to reevaluate the assessment next week and could follow Moodyâ€™s lead, said Finance Director Thomas M. Bruce III.
â€śAlthough the city has taken a number of steps to stabilize and improve its fiscal position following a long-term trend of operating deficits, continued School Fund overspending resulting in a decade of annual operating deficits through 2012, as well as severely weakened liquidity, rising debt service and pension costs, reduced state aid and a stagnating regional economy are impeding the cityâ€™s fiscal recovery,â€ť Moodyâ€™s said in a report released Thursday.
The report was based, in part, on the assumption that state lawmakers would okay a 13 percent supplemental tax bill, allowing the city to promptly gain access $3.2 million in short term notes to ease cash flow. Arguably, the cityâ€™s financial position is actually weaker than Moodyâ€™s assumed it would be because the House killed the cityâ€™s supplemental tax plan hours before the report was released.