Aug 21 (Reuters) - Moody's Investors Service downgraded to A3 from A2 the long-term rating of Johnston, Rhode Island, on Tuesday because of continued underfunding of the town's public pension plan.
The credit rating agency also assigned a negative outlook. The actions affect $24.5 million of the town's outstanding debt.
The town of nearly 29,000 is expected to face challenges as it tries to structurally balance its operations and increase annual payments to police and fire pensions, even as its revenue remains weak, Moody's said.
Johnston, like dozens of other Rhode Island local governments, runs its own independent public pension plan for some of its employees.
And like several other towns, Johnston's plans are underfunded. Its police pension was funded at just 27.6 percent at the end of fiscal year 2009, and its fire pension was funded at 26.8 percent, according to a September report by the state's auditor general.
However, Moody's said that the town's debt burden is manageable. Its also has a modestly-sized residential tax base with average wealth, and has recently reduced its liabilities for other retirement benefits.