Newtown Receives Bond Rating Affirmations From Moody’s, Standard & Poor’s

By John Voket

In a persistently sluggish economy marked by bond rating downgrades for the state and many municipalities, the affirmation that Newtown will retain its second highest rating available from both Moody’s and Standard & Poor’s this week is being viewed as excellent news by local officials.

First Selectman Pat Llodra said the town received written verification that both bond rating agencies will maintain the town’s current score, with S&P’s outlook classifying the town’s financial operations and management at “the highest possible level of ‘Strong.’” “This agency stated that Newtown is on the right path to achieve a AAA rating in a few years if we continue to implement the recently developed financial management policies and practices related to fund balance and debt management,” the first selectman said.

S&P affirmed Newtown’s bond rating at AA+, and encouraged Newtown to continue the financial discipline demonstrated over the past few years, while focusing on building the town’s fund balance. The fund balance issue was also highlighted by Moody’s in its latest rating report.

Moody’s affirmed Newtown’s AA1 rating, noting that all scoring metrics are very positive and making note of the strong financial management policies committed to by town government, Mrs Llodra said.

“Moody’s places much emphasis on fund balance and again, points out that Newtown’s fund balance is less than other communities with the same bond rating,” she said. “This agency strongly encourages Newtown to continue to build its fund balance and seek to achieve a ten percent balance within a few years.”

Newtown’s Finance Director Robert Tait was praised for his contribution toward helping keep Newtown’s financial ship stable in choppy financial waters, according to Mrs Llodra and Board of Finance Chairman John Kortze.

“Finance Director Bob Tait has been a wise and patient guide and has been the anchor for all of what we have accomplished,” Mrs Llodra said, while also acknowledging elected colleagues. “It has [also] been challenging and has required a steadfastness, commitment, and seriousness of purpose for the Board of Selectmen, the Board of Finance, and the Legislative Council.”

Mr Kortze gave much credit to Mr Tait, who collaborated with the finance board chairman and other officials as financial management policies — some that had long been in the planning stage — finally came to fruition. “In the past few weeks, Newtown has institutionalized policies that have been either informally in place or in the works for many years,” Mr Kortze said.

The finance chairman said Newtown has also been the beneficiary of some good luck. But, Mr Kortze said, the bond ratings agencies’ recognition that Newtown is “swimming upstream against the current” by making hard financial choices such as weaning off using money in the fund balance as revenue to offset increased taxation proved Moody’s and S&P recognized Newtown was working hard to do the right thing in tough times.

“We were able to manage the things we could control, and hedge against the things we couldn’t control,” Mr Kortze said of the town’s most recent raft of financial practices. He also noted that Newtown went into the bond rating review with a perceived liability because the state’s bond rating was recently downgraded.

Mr Kortze said that during back-to-back phone conferences with the agencies, officials were able to point to the financial policies that were in place, and recently codified with support from the selectmen, finance board and council, as well as the finance director.

“We walked them through how we were planning to increase the fund balance [to the recommended level],” Mr Kortze said. “And I think they recognized that this was not just lip service. We’re establishing a record of not drawing from it, but adding to it.”

The finance board chairman said Newtown will soon be able to present defined outcomes of its fund balance policy and other policies crafted to boost the fund balance without adding taxation, when it comes time to be measured against AAA-rated communities in the next few years.

Mrs Llodra agreed, saying both S&P and Moody’s recognized that Newtown’s government has developed and implemented strong and effective financial management policies and practices.

“We established goals and an action plan several years ago to move away from use of fund balance for operational costs; to reduce debt from ten to nine percent over a period of time; to build reserves to a minimum of eight percent of operational budget; to increase our annual ‘pay as you go’ for capital projects; and to better use capital nonrecurring funds to save for known future capital costs,” she said. “And we implemented these policies and practices in a difficult local and state economy.”