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The State of Connecticut’s fiscal situation may be diplomatically described as a slow-motion train wreck, but Newtown taxpayers can rest assured that locally the finance office under the leadership of Finance Director Robert Tait is doing a stellar job as steward of the public’s dollars.
Both the recent affirmation of Newtown’s AAA bond rating from Standard & Poor’s as well as the latest municipal audit prove why a growing number of elected officials have taken to referring to Mr Tait as a “Hall of Fame” caliber municipal financial expert.
Even with the Moody’s bond rating of AA1 — one tick below a perfect score — the work that the fiance office, Mr Tait, and the team of various elected officials he has been working with over the years has been rewarded.
Many if not every time Newtown has gone out to bond capital projects in recent years, it has come back with borrowing rates that are measurably lower that a number of other Moody’s AAA-rated towns in the state received.
“As long as the net position is increasing year over year, that indicates the town is going in the right direction financially,” Mr Tait told The Newtown Bee.
According to introductory notes in the 2016-17 Comprehensive Annual Financial Report (CAFR), Newtown maintains an encumbrance accounting system as one technique of accomplishing budgetary controls, and “as demonstrated by the budgetary schedules included in the financial section of this report, the town continues to meet its responsibility for sound financial management.”
Mahoney Sabol & Company LLP, a Glastonbury-based public accounting firm fully licensed and qualified to perform audits of municipalities within the State of Connecticut, most recently audited the town’s financial statements.
According to the auditors, Newtown’s presence in Fairfield County, its proximity to an excellent regional transportation network, its fine schools, public buildings, and wide range of recreational and housing opportunities have all contributed to its continued growth and excellent financial condition.
The town’s economic base is supported by a diverse offering of services, the report noted. Medical service providers, retail locations and restaurants, banking, research and development, and manufacturing continue to contribute significantly to the tax base and vitality of the town.
Among other key stats are:
*The annual average unemployment rate for the labor force was 4.5 percent in fiscal year 2016. The unemployment rate for the labor force in fiscal year 2017 has decreased to 4.0 percent (per Connecticut Department of Labor data by town), the audit states.
*Property taxes, which account for approximately 90 percent of the general fund revenue, have provided a reliable revenue source, with collections consistently at or around 99 percent. Current tax collections were 99.4 percent of the adjusted tax levy, the audit report states.
*The town’s per capita income of $52,379 and median household income of $123,750 (per the US Census Bureau) are above the state’s high averages.
Factoring State Cuts
Auditors note that the state economic crisis has created challenges for the Connecticut state government in trying to meet its budget, and Newtown’s general fund receives more than $8 million from the State of Connecticut, which helps offset local taxes. The audit report affirms that any cuts in state aid will put increased pressure on local municipal budgets.
Auditors also took note of an additional $250,000 that was added to the capital nonrecurring fund for road improvement under the public works department to help hasten the improvement of local roads in addition to $1.5 million approved for roads in the current capital improvement plan and recently authorized for bonding.
Citing ongoing attempts to grow the commercial tax base, the report notes that Newtown’s Economic Development Commission actively promotes and supports projects that lead to new business development and jobs. As a result, the Town of Newtown continues to experience growth in its grand list. Also, local regulation changes including the addition of limited retail activities in certain industrial zones and the addition of regulations for brew pubs and distilleries will help diversity commercial activity in the town.
As a result of the audit, the Government Finance Officers Association (GFOA) awarded Newtown its “prestigious” Certificate of Achievement for Excellence in Financial Reporting for the 17th consecutive year.
Auditors said the 2017 financial highlights include:
*The assets and deferred outflows of resources of the town exceeded its liabilities and deferred inflows of resources at the close of the most recent fiscal year by $281,147,507 (net position). Of this amount, $10,253,131 represents the town’s unrestricted net position.
*The town’s total net position increased by $7,149,124 during the current fiscal year.
*As of the close of the current fiscal year, the town’s governmental funds reported a combined ending fund balance of $25,158,233, a current year increase of $394,324 in comparison with the prior year.
*At the close of the current fiscal year, unassigned fund balance of the General Fund was $12,301,299 or 10.1 percent of total General Fund expenditures and other financing uses.
Expressed another way, unassigned fund balance for the General Fund was sufficient to cover approximately 1.2 months of General Fund operating expenditures.
Regarding debt, the audit report states that at the end of the 2017 fiscal year, Newtown had total long-term debt of $69,680,170 backed by the full faith and credit of the town.
The town’s total debt decreased by $2,906,023 or four percent during the last fiscal year due to scheduled debt service repayments offset by the issuance of $5,090,000 in general obligation bonds, the report states. State statutes limit the amount of general obligation debt Newtown may issue to $723,086,609 — far in excess of the town’s outstanding general obligation debt.
The S&P AAA bond rating affirmation with its “stable outlook,” was equally glowing.
“We rate Newtown higher than the US because we believe the town can maintain better credit characteristics than the US 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,” the rating agency stated.
The rating agency went on to state that its “rating reflects our opinion of the following factors for Newtown,” specifically its:
*Very strong economy, with access to a broad and diverse metropolitan statistical area (MSA);
*Very strong management, with strong financial policies and practices under Financial Management Assessment methodology;
*Strong budgetary performance, with a slight operating surplus in the general fund and an operating surplus at the total governmental fund level in fiscal 2017;
*Strong budgetary flexibility, with an available fund balance in fiscal 2017 of 10.9 percent of operating expenditures;
*Very strong liquidity, with total government available cash at 17.6 percent of total governmental fund expenditures and 2.5 times governmental debt service, and access to external liquidity we consider strong;
*Very strong debt and contingent liability position, with debt service carrying charges at 7.2 percent of expenditures and net direct debt that is 54.9 percent of total governmental fund revenue, as well as low overall net debt at less than three percent of market value and rapid amortization, with 70.9 percent of debt scheduled to be retired in 10 years, but significant medium-term debt plans; and
*A strong institutional framework score.
“We view the town’s management as very strong, with strong financial policies and practices under our Financial Management Assessment methodology, indicating financial practices are strong, well embedded, and likely sustainable,” the S&P report states.
The rating agency closes its latest affirmation stating: “The stable outlook reflects our view that Newtown’s very strong underlying economy and management should ensure continued strong budgetary performance and operating flexibility. In addition, we anticipate the town will be able to weather any fiscal pressures that state budget decisions cause. For these reasons, we do not expect to lower the rating in the next two years.”
Having said all that, if Newtown was to experience budgetary pressure that resulted in negative operations and significantly deteriorated available reserves, S&P states that the agency could lower the rating.