What A Credit Rating Means

To the Editor:

I’ve been hearing a lot lately about the town’s bond rating being upgraded twice in the past three years, from the town’s Democratic Party, as justification for their “success” in how they’ve “managed” Newtown’s fiscal issues, while Mr Rosenthal has been in office. It is a pleasant story –– however, quite a bit misleading.

In last week’s “Letters of Endorsement,” in The Letter Hive, I read one person’s proclamation that Moody’s Investor Services had made such upgrades, in response to their “assessment of the management of this town...” I hate to burst everyone’s bubble on this issue, but that is not what Moody’s, Standard & Poor’s, Fitch, or any other rating agency bases their credit ratings on. All credit ratings are based on an analytical determination of a creditor’s ability to pay its debt –– period.

Newtown’s credit rating is not a reflection of how the town’s government is managed, but on the wealth of the town. The town’s credit is based on the town’s ability to raise taxes, in order to pay its obligations. Since the wealth of the town has gone up (and continues to rise), the town’s ability to tax those households has gone up. In addition, Moody’s (or any other rating agency), would look at the change in the town’s tax payment delinquencies, as a result of recent tax increases. If the rise in the tax rates resulted in a higher delinquency rate, then the rating agency would surmise that the town’s ability to “go to the well once again” would be limited. As this didn’t happen, the rating agency is comfortable that the residents can continue to bear an ever-increasing tax burden.

Beware! This rating agency has made this assessment (ability of the town to raise more taxes as needed), and so has your incumbent leadership. This administration has counted on such, and is claiming the practice as fiscal responsibility. Take a moment to think what this really means. As your household income grows, so does the town’s willingness to assume your success is their own, and they can spend it at their leisure –– without recourse. I say “vote ‘em out!”

I really don’t mind paying my taxes. Nor do I mind having the tax bill continue to go up, as long as it is spent wisely. I can’t reconcile that they (taxes) have gone up materially every year, but my kids aren’t sure if they can participate in traditional school activities, since the current budget doesn’t have capacity for those expenditures. I don’t think this is a revenue problem, nor an expense one, but one that exists in the town’s management.

Sean P. O’Connell

Butterfield Road, Newtown                                     October 27, 2003