By LISA SCOTTI

Johnston Mayor Joseph Polisena announced on Tuesday that the town’s bond rating will not fall below its present BBB+, although rating company Standard and Poor did lower the town’s outlook from “stable” to “negative.” Standard and Poor’s report attributed the outlook drop to the town’s poor financial position in 2006, stating the “pressures from school-related operating deficits [and] an additional weakness [in] the town’s large unfunded pension liabilities.”

According to a chart circulated during Polisena’s press conference, Standard and Poor’s “BBB” does translate into “good,” which means town bonds are still considered investment-grade.

The report also noted that, according to preliminary information, Johnston’s finances appear to have improved in 2007, due to the $4 million supplemental tax increase and the expense reductions that have been made town-wide. The report added that the relatively new Polisena administration, inaugurated in January, seemed to be moving the town’s finances ahead in a positive fashion, not only through the supplemental tax but by appointing “a new finance director and many new department heads.” It further recognized recent development projects, like the Federal Express Distribution Center and the proposed trash-to-energy company, as more evidence of Johnston’s potentially recovering financial status.

 “The mayor talked to [Standard and Poor representatives] directly about the steps that he has taken, along with the council,” said William Fazioli, a member of First Southwest Company, which serves as the town’s fiscal advisor. “[Standard and Poor] felt enough was in place to hold off a rating downgrade.”

Polisena acknowledged there are still many financial problems to be solved, one of the most immediate being the unfunded pension liability. Standard and Poor’s report said the town’s pensions are only 45 percent funded. While Polisena’s Financial Recovery Plan ensured the town’s pension contribution for 2007 is paid in full, said Johnston Finance Director Stephen Woerner, Polisena said he has ordered a full examination of the pension system and the unfunded pension liability, as well as an actuarial study to look for shortfalls.

Standard and Poor, along with Moody’s Investor Service and Fitch Ratings Agency, are the leading municipal credit rating services. Their evaluation determines the interest rate at which municipalities can borrow money.

Polisena said he plans to meet with Moody’s Investor Services in coming weeks.

Peter Kerwin, director of communications for the R.I. General Treasurer’s Office, confirmed that the rating system, “in a sense,” is similar to the way personal credit ratings affect personal loans.

“[The ratings agencies] evaluate the credit risk of a borrower,” Kerwin explained.

The rating is also important because it influences the public’s impression of Johnston and, in turn, that affects whether or not people and businesses move into Johnston.

“It’s more than just the interest rate on bonds,” said Stephen Maceroni, another member of First Southwest Company. “The community and the town are impacted [because for] people and companies to come in they want to know the town is on solid financial footing.”

Polisena, as well as Councilwoman Stephanie Manzi and Councilman Ernest Pitochelli, all attributed the financial improvement to the diligence of Polisena’s administration, which initiated a Financial Recovery Plan soon after taking office eight months ago, and the cooperation between the administration and the Town Council.

“The supplemental tax, the tax increase, they’re difficult decisions,” said Manzi. “But they helped us maintain this bond rating and I think that’s significant.”