Moody's Threatens Credit Ratings Of Mass. Cities

The wrangling in Congress over the nation's debt limit is threatening the credit ratings of a dozen Massachusetts cities and towns and two regional school districts.

Moody's Investors Service has announced it would review the possible downgrade of U.S. municipalities and other institutions due to the indirect effects of the potential downgrade of federal government bonds because of the ongoing impasse over the federal debt limit.

Moody's said it could review the credit ratings of 162 local governments in 31 states.

In Massachusetts, those communities include Acton, Bedford, Belmont, Brookline, Concord, Dover, Hingham, Lexington, Newton, Wayland, Wellesley and Weston.

Two school districts, Concord-Carlisle Regional School District and the Lincoln-Sudbury Regional School District, are also on the list.

Massachusetts' congressional delegation is protesting the warning from Moody's.

In a letter to the credit rating agency, the entire delegation said there's "no rational basis" for the threatened downgrade to cities and towns across the state.

"It is highly irresponsible of you to continue to subject these communities to the wholly unwarranted uncertainty that you have created," the delegation wrote in their letter.

The letter dated Friday was signed by all 10 U.S. House members from Massachusetts and Sens. John Kerry and Scott Brown, the state's lone Republican in Congress.

"Such an unfounded downgrade will subject some communities to potentially higher costs as they seek to meet the critical needs of their citizens for police, fire, education, etc.," they added.

The delegation called on Moody's to give the municipalities an opportunity to show they can meet their obligations and maintain their triple-A ratings.

Moody's said the potential review is linked to the possible downgrade of the U.S. government's triple-A credit rating. Moody's decided on June 13 to place the government's credit rating under review for downgrade.

In the event the U.S. government's credit rating is downgraded, Moody's said it will review each municipality individually, looking at its "direct and indirect reliance on federal spending, sensitivity to deteriorating macroeconomic conditions and vulnerability to disruptions in the financial markets."

At the same time, top Massachusetts officials are continuing to draft emergency plans to keep paying the state's bills if the stalemate over the nation's borrowing limit drags past an Aug. 2 deadline.

The state is slated to receive about $850 million in federal reimbursements in August, much of it for Medicaid bills.

The state has $2.2 billion in so-called "free cash" - state tax revenue not set aside for specific programs - that it can use to pay bills. Massachusetts also finished the fiscal year that ended June 30 with $723 million more in revenues than predicted.

The situation could worsen in September when about $1 billion in local aid payments are scheduled to go out to cities and towns.