One of the world’s top bond rating agencies has reaffirmed Newtown’s equivalent of a perfect credit score. First Selectman Dan Rosenthal told The Newtown Bee February 20 that Standard & Poor’s (S&P) will be maintaining the community’s AAA rating as officials prepare a new bond offering in the coming days.

Newtown Bond Counsel Barry Bernabe, managing director of Phoenix Advisors LLC, told officials that S&P has also assigned the community’s financial status a Stable outlook.

“Congratulations, as this is the highest possible rating,” Mr Bernabe wrote in an e-mail to the first selectman and Finance Director Robert Tait. “The report reads very well and mentions that they rate the town higher than the nation because the town can maintain better credit characteristics. This AAA bond rating will drive strong investor interest in the bonds.”

The bond consultant said S&P representatives noted a range of factors that contributed to the affirmation, including:

*Very Strong Management, with strong financial policies and practices;

*Very Strong Economy;

*Strong Budgetary performance;

*Strong budgetary flexibility, with available fund balance in fiscal year 2018 of 10.6 percent of operating expenditures;

*Very Strong liquidity, with total government available cash at 23.1 percent of total governmental-fund expenditures; and

*Very Strong debt-and-contingent-liability position.

According to Mr Tait, the high points of that report reflect comments that were made by a review team at Standard & Poor’s, which interviewed a trio of local officials and the town’s bond counsel ahead of the planned municipal bond offering and a subsequent bond refunding later this month.

During a Board of Finance meeting shortly after the call February 11, First Selectman Dan Rosenthal said Mr Tait did a lot of advanced legwork by responding to specific questions the S&P analysts who were on the call distributed in advance. Following the S&P notification, the first selectman said the bond agency’s review, “Speaks to fiscal culture embedded in everything we do.”

“S&P acknowledged what they see Newtown doing when other communities may stumble — and that we continue to improve on our fiscal policies,” Mr Rosenthal said. “There’s no question at root of our discussion with S&P that a number of factors speak to fiscal practices that continue to set us apart from other communities.”

“We rate Newtown higher than the nation because we believe the town can maintain better credit characteristics than the nation in a stress scenario based on its predominantly locally derived revenue base and our view that pledged revenue supporting debt service on the bonds is at limited risk of negative sovereign intervention,” S&P states in the introduction to its latest ratings summary.

The agency states that “The rating reflects the town’s high income levels as well as the economic stability of the nearby Bridgeport-Stamford [region] and conservative financial practices that have led to consistently strong financial performance, despite recent uncertainty in state aid.”

Its report goes on to say that, “We believe that limited fixed costs provide operating flexibility and that management will likely continue to adjust the budget to remain balanced while seeking to expand the local property tax base.”

The S&P report also points out that “The town has a projected per capita effective buying income of 178 percent of the national level and per capita market value of $161,179. Overall, market value has grown by 1.5 percent during the past year to $4.5 billion in fiscal 2019.”

Regarding some of the strengths that town leaders have worked to install and maintain over the past decade and a half, S&P notes, “We view the town’s management as very strong, with strong financial policies and practices under our [financial practice] methodology, indicating financial practices are strong, well embedded, and likely sustainable.

Specifically, management uses ten years of historical data to inform conservative revenue and expenditure assumptions and conducts regular budget forecasting to determine whether revenue or expenditures will deviate from long-term trends.

“In addition, management regularly monitors budgetary performance, ensuring timely adjustments. Management provides monthly reports on budget-to-actual results to the town council. Newtown maintains a comprehensive, ten-year financial plan and a rolling five-year capital plan with all funding sources identified,” the report continues.

“The town has its own formally adopted investment policy, and it makes monthly reports on holdings and returns to the first selectman and quarterly to the council,” S&P says. “Newtown recently reviewed and updated its debt-management policy and reduced its debt-service limit to nine percent of general fund expenditures from 9.8 percent. The policy also sets affordability and refunding targets.

“Finally, the reserve policy calls for an unassigned fund balance of eight to 12 percent of total general fund expenditures based on cash-flow needs. Historically, management adheres to its debt-management and reserve policies,” the report concludes.