WEST WARWICK — Despite the town’s bond rating dropping slightly according to Moody’s, the town’s credit rating agency, Town Manager Fred Presley is confident it won’t stay down for long.
Presley informed the council at Tuesday’s meeting that the town’s bond rating has gone down from Baa1 to Baa2.
“We’re still investment grade and according to national standards, where we stand is considered average,” he said. “I’m very confident that once we get to union resolutions this will definitely go up. The economic development is increasing as well and that’s a part of what they look at but there’s no doubt it will improve.”
Presley explained there are two major bond companies that provide annual reports to the town are Fitch and Moody’s. Fitch’s annual report comes out in June while Moody’s is released in August.
Ratings vary depending on the bond company. According to Moody’s ratings tier, West Warwick’s rating only dropped slightly and still has adequate capacity to meet its financial commitments. Anything below a B is considered a junk bond.
He went on to explain that municipal bonds are the most desirable for investors because a town will pay its bills.
Three weeks ago the department of revenue, First Southwest, Presley and others had a conference call with representatives from Moody’s as part of the annual communications.
“There’s no question they had to downgrade us because the Annual Required Contribution (ARC) isn’t funded,” Presley said, “I wanted them to hear from the state so that it wasn’t just us telling them where we stand and Moody’s was very favorable in their response to hear about the direction we’re going.”
According to a portion of Moody’ report, the fiscal 2014 budget was adopted with a 3.9 percent property tax levy to offset a 4.3 percent increase and included no appropriation of reserves.
The town budgeted to pay $3 million toward its $10.9 million local pension ARC with the potential to increase the contribution by $5 million by year’s end if negotiations with unions over pension and healthcare benefit changes progress.
In fiscal year 2011 the town contributed $1.3 million of its $6.9 million ARC. In 2012 the town contributed $1.1 million of its $8.7 million. In 2013 the town’s contribution was $6.6 million of its $10.6 million unfunded liability of $115 million.
For the 2014 budget, the town further decreased its contribution to $3 million of a $10.9 million unfunded other post employment benefits (OPEB).
Presley said he and other officials are in constant contact with union representatives and will be scheduling more meetings over the next two weeks to negotiate further.