News Column

Fitch: West Warwick, RI Residents Approve Budget; Avert Potential State Takeover

May 23, 2014



NEW YORK--(BUSINESS WIRE)-- Voters in West Warwick, RI (GO bonds rated 'BBB-' Rating Watch Negative by Fitch) successfully approved the town's proposed fiscal 2015 operating budget via referendum yesterday. The passage of the budget allows the town to begin to implement its plan to fully fund its severely underfunded pension system. In Fitch Ratings' view, the passage caps an impressive collaborative effort of all affected parties.

West Warwick's financial pressures are mainly the result of generous pension and health benefits which went underfunded for years, culminating in exceptionally high future retirement liabilities. The town-administered pension has a funded ratio of 17% as of July 2013 with a large unfunded liability of $128 million compared to an annual budget of $86 million.

The state became active in addressing the pressure of the local government-administered pension plans' growing liabilities after the financial downfall of Central Falls, East Providence and Woonsocket and subsequent required state oversight. It required all local governments with pension-funded levels below 60% to provide the Department of Revenue with a plan to improve their funding status including meeting full annual required pension contributions and funding future OPEB liabilities. West Warwick management began working with state officials in 2012 to determine certain courses of action to help achieve its goal of full funding of its pension, something it had not done in many years.

After over 18 months of negotiations, the town's bargaining groups and individual retirees have reportedly come to an agreement with the town on significant cuts in benefits, all in an effort to avoid the potential loss of even more benefits if a state takeover were to occur. In an important next step town voters approved the proposed fiscal 2015 budget including a 3.79% tax levy increase as well as reduced employee salary and benefit costs. The passage of this budget is the first step in the town's five-year plan to fully fund its pensions and address future OPEB costs. The referendum passed 836-to-223. The five-year plan assumes additional annual tax levy increases, but these could be mitigated by an improving economy and tax base growth.

Fitch will be addressing its Rating Watch Negative on the town's general obligation bonds within the next 7-14 days.

Additional information is available at 'www.fitchratings.com'.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.



Fitch Ratings

Primary Analyst

Kevin Dolan

Director

+1-212-908-0538

Fitch Ratings, Inc.

33 Whitehall St

New York, NY 10004

or

Secondary Analyst

Michael Rinaldi

Senior Director

+1-212-908-0833

or

Media Relations:

Elizabeth Fogerty, +1-212-908-0526

elizabeth.fogerty@fitchratings.com


Source: Fitch Ratings


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