W. Warwick bond rating downgraded

NEW YORK – Fitch Rating last week affirmed the “BBB” rating on the Town of West Warwick’s outstanding $18.9 million general obligation bonds, but downgraded its outlook from “stable” to “negative.”
In a news release, Fitch said the “BBB” rating reflected the town’s below-average economic indicators, a limited employment base, and severely underfunded pension system, which offset West Warwick’s credit strengths, including a low debt burden and fairly limited capital needs.
Also incorporated in the “BBB” rating is the effect of a state-wide property tax cap that greatly limits annual levy growth and resultant limited financial flexibility, Fitch said.
The rating service also noted that a deteriorating housing market continues to largely offset steady tax base growth of recent years. And Fitch said data show foreclosure rates in West Warwick above the national average.
The outlook downgrade reflects “heightened stress on financial operations due to further deterioration of both general government and school operating performance in fiscal 2009 and the high likelihood of reductions in state aid, which totaled 37 percent of general fund expenditures and transfers out in fiscal 2007,” Fitch said.
“With revenue pressure from the tax cap and potential state aid reductions, future financial flexibility is contingent upon spending curtailment, which is extremely challenging given the current school deficit combined with a high and rising labor fixed cost burden,” the rating service added

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