The Middletown Press (Middletown, CT)
STABLE OUTLOOK
For second year in row, Mayor Drew touts AAA bond rating: ‘We’re in extraordinarily good shape financially’
MIDDLETOWN >> The mayor has announced the city has maintained its AAA bond rating — the highest possible and an indicator to investors of bonds with the lowest risk — for the second year in a row.
The city’s rating, just reaffirmed by Standard & Poor’s, will allow it to compete with high-income communities in securing low-interest rate loans to finance public projects. This designation also means the town will pay less — possibly significantly less — in interest costs when it goes to market to sell general obligation bonds, which will take place this week.
The city has experienced three bond rating increases since 2005, when it was AA-, according to Finance Department Director Carl Erlacher. In 2014, S&P raised Middletown to an AA+ category from AA, which was the highest rating the city had been given at that point.
S&P’s ratings confirm Middletown’s credit state as “above the sovereign,” meaning “the city can maintain better credit characteristics than the U.S. in a stress scenario,” according to the Ratings Direct analysis
completed March 22.
“The ratings agencies have taken another look at us and they have said, ‘yes, Middletown is very strong, because not only do we issue them the AAA rating again but we’re awarding it with a stable outlook,’ which means that they think we are very secure,” Drew said.
The AAA rating is reserved for the most premier and financially strong communities, the mayor said in his letter to Common Council members and department heads.
Drew said AAA ratings usually go to very wealthy communities, such as those in Fairfield County. “The fact that Middletown, which has a very broad socioeconomic profile — we have people that are in the lower end of the income spectrum and people that are in the higher end and everyone in between — has this rating is a very good sign.
“It is a strong indicator that we are in extraordinarily good shape financially and that we have a ... very optimistic future,” Drew added.
In its report, S&P concluded the city has a “very strong economy, with access to a broad and diverse metropolitan statistical area; … strong management, with good financial policies and practices under its financial management assessment methodology; ... strong budgetary performance, with balanced operating results in the general fund and a slight operating surplus at the total governmental fund level in fiscal 2016; … very strong budgetary flexibility, with an available fund balance in fiscal 2016 of 18 percent of operating expenditures; and very strong liquidity and access to external liquidity we consider strong.”
The designation indirectly affects the city’s tax rate, Drew said. “It reduces costs the city has every time it borrows and it means that we’ve become an exponentially more attractive place for businesses to locate.
“Big companies like coming to a place like Middletown because when they see that we have AAA finances, it means it’s a stable community and if they look at this, it means that this is a predictable place to do business, and they can see we’ve been rated by an objective third party as having an extraordinarily strong economy,” he added.
Middletown is among towns such as Cromwell, East Hampton, Glastonbury and Cheshire, which all offer financial institutions a much less risky bond purchase. “The success of getting one of these things ends up compounding itself. It’s like compound interest in a way, it just keeps building and building and building,” Drew said.
Last year, Majority Leader Thomas Serra said the city was able to reach the milestone because of the key policies Common Council members and mayors have adopted over the years to ensure financial stability. “In 2005, when I came
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