New trouble for Woonsocket as Moody’s joins Fitch in warningJanuary 6th, 2012 at 11:53 am by Ted Nesi under Nesi's Notes, On the Main Site
Moody’s Investors Service said Thursday it has begun a review of Woonsocket’s credit rating – already at junk status – and warned of the potential it may be downgraded again. The announcement comes less than a month after Fitch Ratings, which rates Woonsocket one notch above junk, put a negative outlook on the city.
Woonsocket Mayor Leo Fontaine told WPRI 12 last month his city’s financial circumstances are “very tenuous.”
“The state continues to watch the situation in Woonsocket closely,” Christine Hunsinger, a spokeswoman for Governor Chafee, told WPRI.com on Friday.
The announcement from Moody’s came the same day Governor Chafee convened a summit of municipal leaders to discuss what he termed the “crisis” facing Rhode Island’s cities and towns. Moody’s said the review was a response to the news that the Woonsocket schools finished the 2010-11 fiscal year with an unexpected deficit.
“While the city has undertaken meaningful steps to eliminate its accumulated deficit and stabilize its financial position … continued deficits in school operations has put Woonsocket’s finances under considerable pressure,” Moody’s said. “In addition, the city continues to underfund its local pension plan.”
The rating agency said its review will examine Woonsocket’s 2010-11 audit and evaluate “the city’s financial and liquidity position, its deficit reduction strategy, and possible intervention by the state.” Central Falls and East Providence are the only two cities whose finances are currently under formal state oversight.
Moody’s warned last month more municipalities are likely to see their credit ratings downgraded, particularly those with one of the 36 locally run pension plans that were left out of last year’s law. Many of them are deeply underfunded, including Woonsocket’s.