Newtown Achieves Coveted AAA Bond Rating From S&P
Just two days after making a case based on Newtown's adherence to a variety of financial management policies and evidence that new commercial development will be supplementing the community's grand list in the coming years, officials learned February 12 that Standard & Poor's awarded the community a AAA bond rating.
A group of officials including First Selectman Pat Llodra, Finance Director Robert Tait, Community Development Director Elizabeth Stocker, and Board of Finance Chairman John Kortze traveled to Boston February 10 for presentations to S&P and Moody's Investors Service.
Their trip came shortly before Newtown goes to the market with its latest bond initiative, which is expected to occur in early March, Mr Tait told The Bee.
After receiving the news late Wednesday afternoon, Mrs Llodra said via an email message that the community achieved the equivalent of a perfect credit rating based on the strength of its financial practices and the cast of town employees and volunteer elected officials who make, administer and advise on those practices.
Newtown's bond adviser, Barry Bernabe, Senior Vice President of the Government Banking Group at Webster Bank said he was notified that S&P based its upgrade on two specific factors: "A strong financial management team," along with "financial discipline, during the recession, to maintain stable operations and to continue to grow the fund balance."
"I am very pleased and especially proud of the rationale given," Mrs Llodra said reflecting on the S&P feedback. "It really speaks to our efforts...to create an understanding of best practices and to execute on good policies."
Referring to members of the Boards of Selectmen, Finance, the Legislative Council, and Mr Tait Mrs Llodra noted, "Your role in this has been critical. Thank you for your good guidance and skills galore!"
Officials expect a detailed report from S&P on its decision to upgrade the Newtown's bond rating as early as Tuesday, February 18. Officials are also waiting for word from Moody's, which could also bump the town up or maintain its Aa1 status, the agency's second highest rating.
Local officials including Mr Kortze believe Moody's has held the line on Newtown's bond rating over several years because of its work not only upgrading, but adhering to new or strengthened financial practices. Those practices have outweighed the facts that multiple local budgets have failed at referenda in recent years, and that Newtown continues to lag behind AAA rated towns in the ratio of savings to its overall budget.
Shortly before receiving official news from S&P Wednesday, Mr Tait told The Bee that documentation he obtained from S&P during the Boston trip showed virtually all Connecticut AAA rated towns maintain an "assigned" fund balance of about 12 percent or more.
Newtown has, in recent years, worked to infuse its fund balance using a combination of new or upgraded policies and practices to bring its "assigned" fund balance to slightly more than 10 percent.
In observing S&P review team reactions to Newtown's latest presentation, Mr Kortze used phrases like "off the charts."
"Pat and Bob led the meeting," Mr Kortze said. "The strength of our management team dominated. They were able to show that our (financial) policies are not only written, but followed."
Mr Kortze suggested that those policies and practices may have also saved Newtown from a downgrade by Moody's. He said he understood from Moody's analysis and comments that the community was facing a likely downgrade before it stopped tapping the fund balance - the town's savings account - to offset taxation.
"That said, Moody's reaction Monday was very positive," Mr Kortze added, saying he believes Moody's will neither affect upward nor downward pressure on Newtown's bond rating.
Mr Tait observed that the S&P review team was equally impressed with a presentation by Ms Stocker.
She spent a few minutes showcasing myriad commercial developments either proposed or in some stage of progress; news that town officials just approved a key sewer line project to further boost commercial economic development; and aesthetic enhancements being made through private/public steetscape projects.
The finance director said S&P was also "very impressed with our management of our employee self insurance plan, which represents 10 percent of the budget."
Mr Tait said he also changed his tactics related to preparing for the rating agency visits by sending information ahead of time for consideration. As a result, he said neither agency saw ahead of time that Newtown was making strides in that regard.
"They saw we were improving the fund balance and not using that money to balance our operating budget," Mr Tait said. "It removed their concern that we couldn't balance our budget without tapping our savings account."