City's bond rating downgraded -- again

May 26, 2012

WOONSOCKET – Citing continued erosion of the school department’s finances, Moody’s Investor Service downgraded the city’s bond rating from Ba2 to B2 Thursday, three notches deeper into junk territory.
Moody’s said the city remains on watch for further downgrades. Meanwhile, Fitch Ratings, which already pegs the city’s bond rating at a junk-level BB-, is scheduled to reevaluate the assessment next week and could follow Moody’s lead, said Finance Director Thomas M. Bruce III.
“Although 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 city’s fiscal recovery,” Moody’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 city’s financial position is actually weaker than Moody’s assumed it would be because the House killed the city’s supplemental tax plan hours before the report was released.