Moody's Assigns A1 Rating to $5.9m in Town Bonds

COVENTRY, RI—The town has recently received some positive bond news from Moody’s Investors Service.

Moody’s on Monday assigned an A1 rating to $5.88 million of the town’s general obligation bonds, which are scheduled for sale on Thursday.

The rating reflects the town’s “satisfactory reserve position which has remained stable for four consecutive years,” according to the ratings report.

In other words, the ratings agency believes that the town has enough spare cash on hand to weather a short-term economic hardship. Communities are expected to maintain a rainy day fund of anywhere from 10 to 20 percent of its annual budget.

The rating would be higher if it weren’t for the town’s large unfunded pension liability, Moody’s said, though the town is “addressing through an adopted pension funding improvement plan.”

Moody’s did not issue a ratings outlook, which could either be positive, negative or neutral. It is not common practice to assign ratings outlooks to local governments with this amount of outstanding debt, the report stated.

The town could see a future ratings increase if the pension fund funding status improves, thee town’s reserves continue to accumulate and if the tax base significantly expands.

Things could slide, however, if a recent trend of “continued declines in the tax base that materially affect revenue raising ability,” operating deficits, underfunding of the pension liability and “large increase[s] in debt levels,” according to the report.

The proceeds from the $5.9 million bond will be used for various capital projects including roads, streets, dam repair, equipment purchases for storing of refuse and recyclables and remediation of a landfill.