By PBN Staff
NEW YORK – Moody’s Investors Service – a globally recognized rating agency – has downgraded the town of Johnston’s general obligation rating from A2 to A3, outlook ‘negative.’
The downgrade is on Johnston’s long-term rating, affecting $24.5 million of currently outstanding general obligation debt.
According to the report, the downgrade to A3 reflects continued underfunding of the town’s local pension plans and an improving operating fund balance position after the town experienced budgetary pressures partially due to recent state funding reductions.
The rating also incorporates the Johnston’s moderately-sized tax base with average wealth levels and a manageable debt position.
The ‘negative’ outlook is based on the agency’s expectation that the town will remain “challenged to obtain structurally balanced operations while simultaneously making progress toward increased funding of the police and fire pension actuarially required contributions in an environment of continued revenue weakness and ongoing expenditure demands,” according to the report.
According to Moody’s, Johnston’s strengths include a manageable debt burden, moderately-sized residential tax base with average wealth indices and recent reductions to OPEB liabilities.
The rating agency listed the town’s challenges as a weak pension and OPEB funded levels and continued underfunding of pension actuarially required contributions along with recent asses value declines and slow revenue growth with property tax levy limitations.
Future rating actions by Moody’s will reflect Johnston’s “ability to take the necessary steps to achieve and maintain structural balance including the improved funding of its police and fire pension funds in fiscal 2014 and beyond.”