Upgraded Bond Rating Promises Savings For Town

By Steve Bigham

Ben Spragg is not one to show much excitement, but the town’s mild-mannered finance director was all smiles earlier this week after receiving some good news from Moody’s Investors Service.

In a letter received Tuesday, Mr Spragg was informed that Newtown’s bond rating had been upgraded from “A1” to a “AA3” – great news for a town which expects to float bonds in excess of $50 million in the coming years. In short, the improved bond rating puts the town in a much better position to borrow money.

“Assignment of the AA3 rating reflects the town’s healthy tax base growth and above-average wealth levels; stable financial operations supported by comfortable reserves; and favorable level of debt at an above-average rate,” Moody’s said.

The Moody’s decision also confirmed what many town officials have known all along – Ben Spragg has been the town’s MVP for the past 18 years. His financial leadership, they say, has helped Newtown establish a track record that makes bond holders feel secure.

“It gives you a warm fuzzy feeling all over to know you’ve got someone that well qualified,” noted Legislative Council Chairman Pierre Rochman. “He is definitely an asset. There’s no question about it. While I would like to give some of the credit to the council, really most of it belongs to Ben.”

Mr Rochman said Moody’s clearly saw a town that is planning and not just reacting.

“I think that gives them confidence that we’re on solid footing for the foreseeable future,” he said.

The improved bond rating means the town will save $86,000 on its most recent bond issue of $4.8 million. With $20-30 million in bond issues just around the corner, the town stands to save much more in the future.

 Last month, Mr Spragg and First Selectman Herb Rosenthal journeyed to Wall Street for a meeting with Moody’s. They were there to convince the firm that Newtown deserved an upgraded bond rating. As part of his presentation, Mr Spragg pointed to the town’s capital reserve plan and current surplus picture. Also, the fact that Newtown has installed sewers shows that it has succeeded in planning and paying for major projects. The town’s sewer fund is now self-supporting, Mr Spragg pointed out.

Mr Spragg’s presentation also discussed the town’s current tax base and the potential for further commercial development on 36 acres off Commerce Park Road and at Fairfield Hills.

 The town’s finance director said an AA bond rating will yield the town lower interest rates, and because AA towns are seen as little to no risk, the bonds that they “float” are quickly purchased on the market. Because of this, Mr Spragg said he would not need to buy insurance.

Moody’s last upgraded Newtown’s bond rating in 1972 when it upped the rating from A to A1.

The Moody’s Report

In its report, Moody’s said it expects the town’s healthy taxable value growth (four percent annually since 1997) will continue, given ongoing residential and commercial growth. Moody’s anticipates that the town’s financial operations will remain stable given the trend of increasing property tax revenues, conservative fiscal management, and satisfactory reserves.

Moody’s report indicated satisfaction with the town’s General Fund, which provides a one-year window of financial flexibility before it is used. The Wall Street firm credited the town management’s “prudent” budgeting approach, which has built the town’s reserves to $6.5 million or 11.49 percent of revenues.

 Moody’s was also impressed with the town’s Capital and Non-recurring Expenditures Fund, another source of long-term financial flexibility. That fund has increased to $3.4 million or 5.9 percent of the General Fund revenues. Mr Spragg expects that figure to jump to $4.3 million this coming year.

Moody’s did not seem concerned by town plans to draw down this reserve by $700,000 in 2001 for tax relief purposes. This draw, Moody’s said, should not significantly hamper the town’s financial flexibility.

In its report, Moody’s also indicated that it believes the town’s debt burden of 2.2 percent is below average and will remain manageable despite sizable future debt plans.

 Moody’s rating scale has 10 different ratings: (from lowest to highest) BAA3, BAA2, BAA1, A3, A2, A1, AA3, AA2, AA1 and AAA.