WEST WARWICK — Following a regular review by Moody’s Investors Service, the town learned last week that the agency has upgraded its outstanding General Obligation Bonds rating, an achievement that could ultimately be of benefit to taxpayers.
Previously rated Baa2 by the national credit-rating agency, West Warwick’s rating has moved up a notch to Baa1, and the outlook has improved from stable to positive.
Town Manager Ernest Zmyslinski said the upgrade represents recognition by Moody’s of the “improvement in the town’s financial position.”
The ratings agency noted that the upgrade reflects the town’s strengthened other post-employment benefits (OPEB) funding practices and its effective expenditure management pursuant to the five-year pension funding improvement plan adopted in 2014. The report also notes that the town’s “operating fund reserves are stable, despite uneven performance across its general fund and school fund.”
As for the positive outlook, that, Moody’s said, reflects the expectation that the town will continue to meet its required pension funding contributions and maintain balanced operations as its five-year plan
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comes to an end.
“The positive outlook shows Moody’s confidence that the town council and administration will continue to enact policies and procedures that will benefit the town and its citizens,” Zmyslinski said.
Obligations rated Baa are “judged to be medium-grade and subject to moderate credit risk and as such may possess certain speculative characteristics,” according to Moody’s, which listed in its report of West Warwick a couple things the town could do to improve its score.
The town could see another upgrade during its next surveillance if, for example, it demonstrates balanced financial operations in fiscal years 2020 and 2021. On the other hand, in the event of a reversal of the positive funding trend of pension and OPEB liabilities, it could experience a downgrade.
Another upgrade would bring the town’s obligations into the “A” range, judged by Moody’s to be upper-medium grade, subjected to low credit risk. The highest ratings possible are Aaa, which mean obligations are “the highest quality, subject to the lowest level of credit risk.”
Zmyslinski said he’s “proud of what [the town has] accomplished.”
“As a town, we still have more work to do as Moody’s notes our rising personnel and benefit costs as well as our pension and OPEB liabilities,” he continued. “However, we have been moving in the right direction and plan to continue on this path. A higher bond rating signals lower risk to investors. This results in lower interest costs in future bond issues, which is good for the taxpayers.”