The City of Somerville received a 3.29 rate on its $13 million Municipal Purposes loan after Moody’s assigns City’s highest ever credit rating to borrowing
SOMERVILLE – Reaping the benefits of the City’s highest ever credit rating in the City’s history, the City of Somerville will now receive a low interest rate on its previously approved short-term 20-year Municipal Purposes loan. After Moody’s Investors Service reaffirmed the City’s Aa2 long-term rating earlier this year, the credit rating agency recently also assigned the City’s more than $13 million in short-term borrowing the same high credit rating.
Moody’s assigned an Aa2 rating to the $13.94 million general obligation loan the City bonded to permanently finance short-term borrowing, originally issued for various capital projects including the newly reopened East Somerville Community School, additional school remodeling and construction of the Founders Ice Rink. Because of the very favorable credit rating assigned to that loan, the City received a low 3.29 percent interest rate over 20 years.
In assigning the credit rating, Moody’s cited the City of Somerville’s conservative budgetary practices, strong reserve levels, ongoing “healthy” redevelopment, above average overall debt burden and the City’s financial position remaining stable despite historical state aid declines. Moody’s also maintained the City’s Aa2 long-term rating on its outstanding general obligation debt, the highest ever long-term credit rating in the City’s history.
“It is costing taxpayers less to fund projects that are propelling the City of Somerville forward due to our great long-term credit rating, and the credit rating on this borrowing and subsequent low interest rate is an example of that,” City Finance Director Edward Bean said. “Moody’s says our financial position will remain stable in the near term because of the City’s conservative budget approach and ample reserve levels, noting that we balanced the budget despite another reduction in state aid of $2.4 million. We continue to offer far more services than most cities and continue to invest in projects while spending nearly the least per capita in Massachusetts. It shows we’re maximizing every tax dollar.”
Moody’s report positively notes that the City of Somerville has “embarked on an ambitious economic development plan,” pointing to Assembly Square and Union Square specifically. It also notes the positive impact of the forthcoming Green Line Extension, the City’s new partnership agreement with Tufts University through which Tufts pays the City $275,000 a year, that income levels in the city have improved over the past 13 years, and that unemployment rates trend comfortably below state and national averages.
“The financial markets see Somerville’s growth, our prudent, thoughtful planning and budgeting, and taxpayers are being rewarded through favorable rates. It’s costing us less to do more,” said Mayor Joseph A. Curtatone. “Smart, targeted investments are unlocking the City’s economic opportunities, broadening our tax base and increasing the quality of life for residents, while remaining at manageable debt levels. This administration’s fiscal policy and the stewardship of our Board of Aldermen has put Somerville on this upward trajectory, and Moody’s recognizes that and is telling the financial markets that Somerville is a great investment.”