COVENTRY – Moody’s Investors Service has cut its credit rating on Coventry’s general-obligation bonds by a notch and put a negative ratings watch on the town, citing “a lack of willingness” to fully fund its pension plans’ actuarially required contributions, or ARC.
Moody’s downgraded its rating on Coventry’s $21.1 million in general-obligation bonds from Aa2 to Aa3. The rating is still three notches from Moody’s top Aaa rating.
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The downgrade and negative outlook were the result of the “weak funded status” of Coventry’s town employee and police pension funds, Moody’s said, noting that they are only 29 percent and 17 percent funded, respectively. Those percentages were among the lowest for locally administrated plans in the state, the agency said.
Moody’s chided town officials for not providing the full ARC in the town’s budget since 2005, including in fiscal 2011 when the town employee pension was funded at 62 percent and the police fund at 69 percent of the required amount.
The agency warned that further downgrades would come if the town continued to underfund its pensions.
“Moody’s believes that the choice not to fully fund the ARC is tantamount to deficit financing and demonstrates an unwillingness to make meaningful progress toward addressing the pension liability in a sustainable fashion,” said the agency’s report released Wednesday.
Earlier this month, Moody’s cut Providence’s bond rating from an A1 to an A3 rating, with a negative outlook.
