CITY JUMPS TWO BOND RATINGS IN STRONG REPORT FROM STANDARD & POOR’S

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Somerville’s highest bond rating ever increases based on City’s strong financial practices, growing economy, low overall debt and aggressive debt
payments
SOMERVILLE – Standard & Poor has raised the City of Somerville’s bond rating from the City’s highest ever rating, AA-, to a new high of AA+, the second highest rating on the agency’s scale and one spot from the rare AAA rating. In its report, the bond rating agency cited the City’s strong financial practices and budget management, low overall debt, strong capacity to meet its financial commitments including aggressive paying off of debt, and a robust, growing economy.
“Standard & Poor’s upgrade of our bond rating affirms that our approach is the right approach, balancing conservative budgeting with ongoing strategic investment in our community and a long-term development vision laid out in SomerVision,” said Mayor Joseph A. Curtatone. “If these bond ratings seem arcane, here’s how it directly affects each and every one of our taxpayers: It saves you money. This past year, the two winning bids for the sale of our short-term bond anticipation notes came in with net interest costs of .15 percent and .19 percent. This latest report from Standard & Poor’s means we will continue to receive phenomenally low interest rates. Investors are willing to loan us money at almost no cost because they believe in us and want to invest in us. And that makes it that much more affordable for us to invest in our schools, parks, infrastructure and affordable housing.”
The report issued on March 13 specifically cites the City’s strong management conditions and prudent budget performance, with the City realizing a surplus equal to 1.9 percent of spending across all funds in FY13. A decade ago the City’s fund equity, a strong indicator of a community’s fiscal health, stood at $11.5 million. While other communities suffered losses in fund equity over the past decade due to the economy, today the City’s fund equity is $47 million, with FY13’s increase of $5.4 million the highest one-year increase in the City’s history.

Standard & Poor’s noted the City’s budget flexibility achieved by conservative budgeting and saving practices, which in FY13 yielded reserves at 17 percent of City spending. The bond rating agency also looked favorably upon the City’s debt levels, citing total government available cash at 30 percent of total expenditures and roughly seven times the City’s debt service.
“Moreover, based on past debt issuance, we believe the city has strong access to capital markets to provide for liquidity needs,” the report states, noting that the City’s overall debt service amounts to 4 percent of spending. “Further bolstering our view of the city’s debt profile is that overall net debt is a low 1.2% of market value and debt amortization is aggressive.”
A Favorable View of the Somerville Economy
Standard and Poor’s has a favorable view of the Somerville economy, noting in its report that development has translated to strong growth and additional revenues. Last year the City realized $3.5 million in new growth–$1 million more than the previous year—including new growth from new commercial and residential construction at Assembly Row, along with the completion of Maxwell’s Green, new construction of the Public Storage facility on Middlesex Avenue, renovation of the Stop & Shop on Route 16 and new personal property growth on Inner Belt Road. Development in Somerville is guided by SomerVision, the City’s 20-year comprehensive plan developed over two years by the community to codify the community’s values such as housing with a range of affordability, green and sustainable development, more public green space and walkable streetscapes, and apply them to each and every development in the city.
“As the City continues investing in projects that improve our community, our higher bond ratings will ensure that it costs taxpayers less,” said City Finance Director Edward Bean. “We are maximizing every tax dollar through our conservative budgeting approach, continuing to offer more services than most cities and strategically investing in projects that improve our quality of life, while our per capita spending remains lower than most cities and towns in the state. Standard & Poor’s upgrade of our bond rating is a testament to the City’s strategy.”

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