government

Woonsocket under review for downgrade, says Moody’s

COURTESY MOODY'S INVESTORS SERVICE
MOODY'S INVESTORS SERVICE – a globally recognized rating company – said that Woonsocket, which is currently rated at ‘B2,’ is under review for a potential downgrade. For a larger version of this graph, click HERE.
Posted 6/4/12

NEW YORK – Moody’s Investors Service – a globally recognized rating company – said that Woonsocket, which is currently rated at “B2,” is under review for a potential downgrade.

The budget commission that the state appointed to oversee Woonsocket after the General Assembly declined to pass a supplementary property tax levy was a credit negative for the city, according to Moody’s.

The city had planned to borrow against receipts from the proposed property tax levy to continue to finance its operations. The levy would have generated roughly $6.6 million in additional ongoing revenue, a 13 percent increase to the city’s property tax revenue.

“Without the new levy, the bank will not provide the city with the additional liquidity and, in the absence of state intervention, the city projects that it will run out of cash by the first week of July,” said the Moody’s report.

The report went on to say that the state-appointed budget commission enhances the city’s ability to address the issues since the budget commission has the authority to request an advance of state education aid of $3.3 million, which is currently scheduled for disbursement in late June.

The commission can also request an advance of next year’s aid when the state’s new fiscal year begins on July 1.

“Without such advances, issuance of a cash flow note, the eventual passage of the supplemental tax, or some other way to conserve funds … the city would lack sufficient funds to make a $4.6 million debt service payment on [July 15],” said the report.

The commission will serve as a budgetary adviser to the city and has the power to “enforce fiscal discipline,” according to Moody’s.

The state-appointed body is “one step from the appointment of a receiver, which, among other powers, can recommend a Chapter 9 bankruptcy filing,” said the report.

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