Newtown’s Valuable Money Managers

We are so used to reading stories about government waste and fiscal ineptitude that examples of deft financial management on the public’s behalf stand out like a silver dollar in an open palm of pennies. Last week we reported that Newtown stands to save more than $1 million by securing an extraordinarily low interest rate on $12.4 million in municipal bonds over the next 20 years. Somehow, AA2-rated Newtown got a better interest rate than Darien, which is AAA rated by Moody’s Investor Services. As one bond specialist put it, “Wall Street went crazy for Newtown bonds.”

This good news came despite a decision by Moody’s earlier in the month not to elevate Newtown’s bond rating, based largely on restrictions in the soon-to-be-revised town charter on the use of unrestricted funds, known as a fund balance. Bond investors like towns that maintain a fund balance, or “rainy day fund.” Without those charter restrictions, Newtown may have been able to save even more in financing its debt. (Ironically, state arbitrators, like the ones who recently arbitrated Newtown’s school administrators contract, see a town’s fund balance as a critical part of its “ability-to-pay” calculations — a cookie jar to raid — when it settles contracts. Under Connecticut’s outdated laws governing binding arbitration, apparently there is no such thing as a rainy day — either that or every contract demand constitutes a downpour.)

The bottom line is that Wall Street is impressed with the planning and management of Newtown’s finances. It is a rare acknowledgement of the good work of the keepers of Newtown’s purse strings, from department heads and the selectmen to the Board of Finance and the Legislative Council. Of particular importance to Newtown’s good fiscal reputation is the town’s capital improvement plan (CIP) scrupulously groomed each year by the finance board and implemented by the council. Having a clear picture of Newtown’s financial future helps immensely as the town tries to steer clear of the costly surprises that cause so many towns to drift too far into debt and impair their ability to meet their financial obligations. That is why, for example, the finance board gets so anxious when it cannot get a fix on costs looming in the near future for new high school facilities. It is not being fussy and unreasonable with the school board as it presses for something more than “placeholder” estimates; it is doing the work that ultimately saves the town money.

Newtown is also fortunate to have a financial director who consistently manages the town’s accounts and investments with such precision, clarity, and impeccable integrity that even cursory assessments of the town’s finances show that Newtown knows what it is doing. The knowledge and expertise of Finance Director Ben Spragg year-in-year-out is one of the town’s most bankable assets.