PROVIDENCE – Fitch Ratings this week slashed its credit rating on Woonsocket’s general obligation bonds by four notches and slapped a negative ratings watch on the city.
Fitch downgraded its rating on Woonsocket’s $112 million in general-obligation bonds from ‘A’ to ‘BBB-,’ just one notch above junk status. Last month, the agency put the same rating on Central Falls, which a judge placed into receivership this week after its leaders declared insolvency.
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The Woonsocket decision “reflects the rapid and significant deterioration in the city’s general fund and school fund,” which it attributed to annual deficits caused by overly optimistic revenue projections, rising personnel costs and reductions in state aid, Fitch said.
The Woonsocket City Council has asked the state to allow it to issue deficit-financing bonds to balance its budgets for the current and next fiscal years. Fitch said the councilmen have been reluctant to raise property taxes to support the budget.
Fitch said it could downgrade Woonsocket’s bonds to junk status if the city is unable to get state approval to issue the bonds or if investors start refusing to loan it money. The city already borrowed a combined $9 million last July and January that must be paid back July 1.
Woonsocket is currently working with state officials to put together a plan to balance its budget and put the city on a sustainable fiscal path.
State officials are also concerned about the financial situation in North Providence, which had a ‘Baa3’ credit rating – also one notch about junk status – and a negative outlook from Moody’s Investors Service as of last month.
