Woonsocket bonds dropped to ‘junk’

By Brian Chappatta
Bloomberg News

WOONSOCKET – Fitch Ratings dropped $117.8 million of general-obligation bonds issued by Woonsocket three steps to below investment grade, or “junk.”

An estimated $7.3 million deficit, about 7.6 percent of the city’s general fund, is projected for the fiscal 2012 school budget, following a deficit in the previous year. That reflects “deficiencies in internal fiscal controls,” Fitch said Thursday in a statement. The company lowered Woonsocket’s rating to BB-, down from BBB-, the lowest investment grade.

“Fitch has concerns about the city’s and school department’s ability to implement changes that will meaningfully improve financial stability given that previous efforts have not always yielded intended results,” according to the statement. The company maintains a negative outlook on the credit.

The 2012 deficit “surfaced precipitously” and is mostly related to employment spending, according to Fitch. The city’s alternatives to close the gap include a supplemental property tax, a $3.2 million tax-anticipation note sale and spending cuts such as payroll reductions, the company said.

About 22 percent of Woonsocket’s 41,200 residents live in poverty, U.S. Census Bureau figures show.

Nearby Central Falls entered bankruptcy in August, citing employee expenses it could not afford.