Woonsocket gets upgrade from Moody’s Investors Service

WOONSOCKET MAYOR LISA Baldelli-Hunt said: “Today’s news is a signal to the taxpayers of Woonsocket that our city continues to move in the right direction.” / COURTESY CITY OF WOONSOCKET
WOONSOCKET MAYOR LISA Baldelli-Hunt said: “Today’s news is a signal to the taxpayers of Woonsocket that our city continues to move in the right direction.” / COURTESY CITY OF WOONSOCKET

WOONSOCKET – Citing “narrow but improved” finances, Moody’s Investors Service last week upgraded Woonsocket’s credit rating.

The global credit rating agency affirmed the city’s Ba3 underlying rating for outstanding general obligation debt, and revised its outlook from “stable” to “positive.” Moody’s says the rating reflects improved reserves and liquidity position after four years of budgetary surpluses, which is offset to some degree by the city’s large amount of unfunded long-term obligations.

“The rating also incorporates the challenges the city faces from weak income levels, a very high debt burden and substantial unfunded pension and OPEB liabilities,” according to the rating.

OPEB (other post-employment benefits) comprises mostly health care costs for city retirees.

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Moody’s also assigned an A1 enhanced rating with a stable outlook on $56.3 million in bonds issued through the R.I. Health and Educational Building Corp., a quasi-public group that assists health care and education facilities throughout the state secure financing.

“The revision of the outlook to positive on the underlying rating reflects modest financial improvement, which we expect to continue over the near term,” according to Moody’s. “Given the recent positive operations, liquidity has improved and the city has not needed cash advances since July 2015 (fiscal 2016). We expect that management’s conservative budgeting and adherence to an adopted five-year forecast will ensure the maintenance of adequate reserve levels, and that the city will be able to meet its obligations without any cash flow borrowing.”

The improved rating no doubt comes as welcomed news in Woonsocket, as better ratings typically translate into cheaper borrowing costs and increased debt capacity.

“Receiving a positive outlook from Moody’s, following a two-step rating upgrade in September, shows that they continue to recognize the city’s progress,” said Mayor Lisa Baldelli-Hunt in a statement. “Today’s news is a signal to the taxpayers of Woonsocket that our city continues to move in the right direction.”

Moody’s said growth to fund reserves, long trends of managing operations without the need for cash flow and continued payments of its annual required contribution for pensions could lead to further general obligation debt upgrades. Conversely, operating deficits, renewed reliance on cash flow borrowing to make debt-service payments and significant growth in debt, pension and OPEB liabilities would have an adverse effect.

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