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Local officials shrug off shift on credit status

Decision by Moody’s cites uncertain outlook

By Erica Noonan
Globe Staff / August 18, 2011

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Officials from a number of local communities recently assigned a “negative outlook’’ on their credit ratings by Moody’s Investors Service Inc. said they were mindful of the change in status, but consider their overall municipal financial situations to be sound.

Moody’s announced early this month that 161 AAA-rated local governments in five states would keep their top bond designations for now, but would be watched for indications that their situations should be downgraded. A lower rating could increase financing costs for the municipalities, if they have to offer higher interest rates to attract investors for their bonds.

A dozen Massachusetts communities and two regional school districts were included on Moody’s list, which was issued shortly before another major rating service, Standard & Poor’s, stated on Aug. 5 that it was downgrading the US government’s long-term bond rating from AAA to AA+.

The Massachusetts communities cited by Moody’s are Acton, Bedford, Belmont, Brookline, Concord, Dover, Hingham, Lexington, Newton, Wayland, Wellesley, and Weston, and they were joined by the Concord-Carlisle and Lincoln-Sudbury regional school districts on the list.

John Flaherty, deputy superintendent of finance and operations for the Concord-Carlisle school district, said last week that it was important to note his system “was not singled out’’ for the demotion - nearly all of the Bay State entities with a top Moody’s rating were on the negative outlook list.

“Right now, we don’t have any near-term borrowing coming up, so we don’t believe we are looking at an immediate impact,’’ said Flaherty.

The Concord-Carlisle district’s most recent major bond issue was to raise $897,000 last year for a feasibility study on replacing its high school.

Flaherty said his system’s strong bond rating is supported by Concord, which has an AAA rating, and Carlisle, which has an AA1 rating.

Officials from Moody’s could not be reached for comment, but in a statement the rating service said the Massachusetts communities were at special risk because of the state’s dependence on federal spending.

But local officials played down their community’s reliance on US funds, and the unresolved debate over the federal deficit.

“We are looking forward to a review from Moody’s that will assess our current financial position,’’ said Flaherty. “We believe the rating agency will assess the degree to which the CCHS and its member towns are exposed directly and indirectly to the financial decisions of the federal government’’

While he would not predict the future, Flaherty was upbeat,

“We think we’ll be OK,’’ he said. “We believe any debt issued’’ by Concord-Carlisle “will be perceived as a stable and sound investment by lenders.’’

Floyd Carman, Belmont’s treasurer and tax collector, said his community had never been placed on a Moody’s watch list before. It seemed that the rating agency was being “extra conservative,’’ he said.

Belmont’s top AAA bond rating was reaffirmed just a little more than a year ago, in February 2010, when it borrowed $27 million, he said.

Carman said he thinks Belmont still ranks in the top 15 of the state’s 351 communities as far as its fiscal soundness.

“The economy has been troubled for three years. Now the debt ceiling has been raised but still uncertainty on what will be future reductions in the budget. This is all new territory for everyone to manage through, including Moody’s,’’ he said in a memo to town officials that he had prepared to answer questions about the issue.

“Belmont is financially stable and will continue to be stable, and residents should know that. We have adequate reserves in case we need them to keep the services for town and schools,’’ Carman wrote.

In a telephone interview last week, Carman said he hoped to speak with Moody’s officials next month to clarify that Belmont was on track to keep its top designation and get off the watch list.

“We’d rather not have it as a distraction and get it behind us,’’ said Carman.

Carl Valente, Lexington’s town manager, said this week that he, too, was planning to have a conference call with Moody’s officials to clarify what information the firm will need to give Lexington a clean bill of financial health.

“Even if they were to downgrade our status it would have no impact on our ability to borrow, and insignificant impact’’ on the interest rates for town bonds, said Valente. “We would still like it cleared up, however.’’

Erica Noonan can be reached at enoonan@globe.com.


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