NEW: Moody’s Outlook is Down for RI Cities and Towns, Fitch Upgrades Pawtucket
Monday, December 19, 2011
{images_1}A report issued today by the financial rating service Moody's Investor Services raised concerns about the financial future of Rhode Island' municipalities. According to the report, investors should be concerned due to the growing increase cost of retirement benefits which is “reaching a crisis point.”
The report hits policymakers for not including the municipal systems in the pension reform legislation. Governor Lincoln Chafee had called for inclusion of the cities and town.
According to Bloomberg News, "A lot of national negative trends are particularly acute in Rhode Island,” Naomi Richman, an analyst at Moody's said in an interview. The company has a negative outlook on U.S. local governments, she said. The average debt grade for Ocean State municipalities, at A1, is a step below the Aa3 national median."
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTThe Moody's report comes on the heals of a downgrade for the City of East Providence. That city followed Central Falls into government oversight.
Pawtucket Affirmed by Fitch
Also released in the early a.m. - Fitch Ratings affirms the following for the City of Pawtucket, outstanding general obligation (GO) bonds:
--$5.78 million, GO bonds, series 2001, at 'BBB-';
--$2.64 million, GO refunding bonds, series 2002B, at 'BBB-';
--$10.53 million, GO bonds, series 2005, at 'BBB-'.
The Rating Outlook is revised to Stable from Negative.
According to Fitch:
TAX INCREASE AND PENSION REFORM PROMOTES STABILITY: The revision to Stable Outlook from Negative reflects the city's projection for flat to surplus operations for fiscal ending 2011, contrary to prior reports, and expected budget relief in fiscal 2012 due to a reduction in its motor vehicle exemption to the state minimum. Future budget relief from state pension reform is also predicted.
SCHOOL DEPARTMENT DEFICIT EXISTS: The city and school department continue to work with the state to formulate a plan to eliminate the school fund's cumulative deficit of $2.4 million. It is expected to be paid off over four to five years.
WEAK LIQUIDITY: The city's liquidity remains low requiring the continued usage of tax anticipation notes (TANs) to supplement cash flow.
ELEVATED FUTURE EMPLOYEE LIABILITIES: The city's unfunded pension and other post-employment benefit (OPEB) liabilities are high, but the city has made progress in meeting its pension annual required contributions (ARC).
LOW DEBT LEVELS: The city's debt levels are low.
BELOW-AVERAGE SOCIO ECONOMIC INDICATORS: Wealth levels are relatively low and the city's unemployment rate exceeds state and national averages.
