Moody’s warns Mass. towns of credit downgrades

By Theo Emery, Globe Staff

WASHINGTON – A credit rating agency has warned Dover, Concord, Newton, and Brookline, as well as other Massachusetts towns, that they could face possible credit downgrades as a result of the impasse in Congress over raising the federal debt limit.

Moody’s Investors Service announced late yesterday that it is reviewing credit ratings of 162 local governments in 31 states that could be affected if the federal credit rating is downgraded.

In all, a dozen Massachusetts towns and two school districts are receiving the reviews, illustrating how the looming crisis could have an immediate and deeply negative impact on municipalities that rely heavily on treasury bonds and federal funds.

“The ratings of these local governments, particularly those with a high economic dependence on federal activity, would be vulnerable to a downgrade of the U.S. government,” Moody’s Senior Vice President Matt Jones said in announcing the review.

All of the US House members from Massachusetts scrambled to respond with a letter to Moody’s challenging the reviews. That letter is expected to be sent later today.

The agency’s reviews will focus on potential federal job losses in the towns, as well as the local government’s “reliance on capital markets, its dependence on federal revenues, its sensitivity to macroeconomic cycles, and its available financial resources to offset these risks,” according to Moody’s.

The communities that Moody’s has promised to review are: Acton, Bedford, Belmont, Brookline, Concord, Dover, Hingham, Lexington, Newton, Wayland, Wellesley, and Weston.

In addition, the Concord-Carlisle Regional School District and the Lincoln-Sudbury Regional School District are receiving reviews.