Moody's downgrades Winsted's bond rating

WINSTED — At the Board of Selectmen meeting on Monday, Dec. 6, Finance Director Henry Centrella told selectmen that Moody’s Investor Service has downgraded the town’s general obligation bond rating from Aa3 to A1.

A general obligation bond is a type of bond secured by either state or local governments that acts as a pledge to use resources to repay bond holders.

Moody’s Investors Service, which was founded in 1909, is a national credit rating agency that conducts financial research and analysis on commercial and government entities.

According to the report issued by Moody’s, several factors were taken into account in downgrading the town’s bond rating.

The first reason listed in the report is that Moody’s expects the town’s budget reserves to decline.

At the end of fiscal 2009, the town ended with a total general fund balance of $991,000, down from $1.63 million in fiscal 2007.

Moody’s projects fiscal 2010 will see a further decline in the balance to $686,898, representing a 30.1 percent decline from fiscal 2009.

“Operating deficits have been driven primarily by unfavorable budget to actual variances caused by overspending on education, employee salaries and public safety,†the report states. “The town did not budget to appropriate any fund balance in 2011, but management indicated that continued overspending on education is likely, which could require the use of reserves.â€

Another factor in the downgrade, as listed in the report, is that the growth of the tax base is expected to slow.

According to the report, while the town has a diverse tax base, the town’s top 10 taxpayers account for only 5.4 percent of the total grand list, which reflects little tax base concentration.

“The town is primarily zoned residential, however, there is an important industrial and commercial presence, which includes several manufacturing firms,†the report states. “Wealth levels in the town fall below state and national medians. Positively, the town has an 8.8 percent unemployment rate, which is lower than state and national levels.â€

The report lists that the 2009 full valuation for the town is $1.18 billion.

The full report is online at moodys.com.

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