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AMESBURY, MASS., G.O. RATING LOWERED BY MOODY'S FROM Baa1 TO Ba; SEVERE FINANCIAL STRAIN CITED

 AMESBURY, MASS., G.O. RATING LOWERED BY MOODY'S FROM Baa1 TO Ba;
 SEVERE FINANCIAL STRAIN CITED
 NEW YORK, July 20 /PRNewswire/ -- Moody's Investors Service today announced that speculative elements have arisen in Amesbury's credit standing due to its now poor financial condition.
 Several years of growing general fund subsidies to the municipal hospital have substantially added to other financial pressures caused by local aid reductions, Proposition 2 1/2 limits, and the recession. The town is reliant on the short-term market for operating loans equal to more than 50 percent of its annual operating budget; the revenue anticipation notes are retired annually with the proceeds of renewal notes. Although steps are under way to reduce the town's financial exposure to hospital operations, the magnitude of the town's financial deterioration and the revenue raising constraints of Proposition 2-1/2 will impede efforts to restore the general fund to a positive level. Management projects that it will require a minimum of seven years to eliminate the need for annual deficit-funding note issuances and visible financial improvement in the near term appears very unlikely. These factors contribute to the rating revision from Baa1 to Ba.
 The town's current plan to eliminate its financial exposure to the hospital is through the leasing of the hospital to a private, for-profit company. The town projects that hospital operations can be reversed and profit realized in fiscal 1993. Should this scenario be realized, a likelihood which Moody's does not consider well-assured, the town would receive additional annual monies, albeit modest, from the hospital which will reportedly be dedicated to reducing the general fund deficit. However, should the leasing arrangement presently being discussed not be finalized or should the firm leasing the hospital withdraw from the lease, further weakening of the town's credit position is possible.
 Amesbury has $9.3 million of general obligation debt outstanding, of which a significant portion is limited tax in nature. Debt service payments have been made in full and on time although debt service on both long- and short-term obligations is a significant component of the budget.
 Amesbury is an older manufacturing town located approximately 40 miles north of Boston. The town has been experiencing high unemployment rates and falling market values, as represented by an 8.6 percent decline in the tax base over the past two years, due to the severity of the recession in the area economy.
 This rating action applies to $2.6 million non-insured general obligation debt outstanding.
 -0- 7/20/92
 /CONTACT: Joan Dougherty of Moody's, 212-563-7737/ CO: Town of Amesbury ST: Massachusetts IN: SU: RTG


GK-OS -- NY071 -- 0861 07/20/92 15:33 EDT
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Publication:PR Newswire
Date:Jul 20, 1992
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