NEW YORK – In what it said was “the course of routine surveillance,” Fitch Ratings last week downgraded the rating on Woonsocket’s approximately $119 million of outstanding general obligation bonds to ‘A-’ from ‘A.’ The rating outlook has been revised to “negative” from “stable,” the company said in a statement.
The downgrade reflected a deterioration of Woonsocket’s financial position, coupled with weakened economic indicators. FY 2008 marked the third consecutive year that the city had operated with a general-fund deficit. Combined with the use of one-time revenues to balance operating budgets and the statewide limit on annual property tax levy increases, Fitch said the city had “below average financial flexibility and a restricted operating environment.”
The revision of the rating outlook to “negative” reflected concerns over Woonsocket’s ability to stabilize its financial position and restore a portion of its unreserved general-fund balances. “Ongoing contract negotiations with several of the city’s unions and other growing fixed-cost obligations will likely add budgetary pressure in the coming fiscal years,” Fitch wrote. “While the corporate headquarters of CVS [Caremark Corp.] is expanding and adds some stability to the local economy, a stark increase in the June 2008 unemployment rate to 9.1 percent from 5.4 percent the prior year underscores a softening local economy.” •
