The City of Derby had its bond rating lowered Dec. 8, while the Town of Seymour saw its rating remain as is, according to reports from Standard & Poors Rating Direct.
Bond ratings are indicators of fiscal health. Cities and towns with high bond ratings pay lower interest rates when borrowing money.
This year bond ratings were big news because of the state’s prolonged budget process and accompanying financial problems. The state’s poor fiscal health and economic uncertainty reverberated to local municipalities, with ratings agencies making reassessments across the state.
Towns and cities rely on state aid to supplement local budgets. The fact that towns and cities were in the dark as to how much state money would be received thoroughly disrupted this year’s budget process in places such as Seymour and especially Derby.
Seymour’s bond rating remains at AA+, with a stable outlook. That’s the second highest rating, town officials said.
Seymour First Selectman Kurt Miller said his town’s obsession with fund balances, debt restructuring, cost cutting and careful budgeting allowed the town to avoid a bond rating decrease.
The town even has a “mill rate stabilization” account built within its budget, the town noted in a prepared statement Tuesday.
“In this current market condition, having the strong bond rating reaffirmed is a very big deal,” Miller said.
Miller lambasted the state for its budget woes, saying state government threatened to cut funding to well-organized, fiscally stable towns such as Seymour.
The S&P Ratings Direct information about Seymour is posted below. The article continues after the document.
“Municipalities across the state were introduced to a harsh lesson this year: if you are a Town that has been well run, budgeted conservatively, controlled expenditures, built reserves and maintained a strong credit rating, the state is going to penalize you for that,” Miller said.
Miller is currently exploring a run for state office, most likely treasurer.
The S&P Ratings Direct report on Seymour notes that several leading employers and businesses in the town have expanded, including Basement Systems and Thule.
“We consider Seymour’s economy very strong,” the report states.
In addition, the town’s “budgetary performance is strong,” with budget surpluses, increased tax collection efforts, and some $155,000 in cost-cutting. S&P Ratings Direct also noted the town’s strong cash reserves.
Stephan Behuniak, a member of the Board of Selectmen, said the S&P Ratings Direct info shows Seymour is in good fiscal health.
“The credit for this goes to the First Selectman, the Finance department, the Boards of Selectmen and Finance, and the taxpayers for continuing to support our efforts. I think we’re actually reaching a point where we need to consider starting to spend down a little bit of fund balance — which is a good problem to have,” Behuniak said in an email.
Behuniak is a Democrat. Miller is a Republican.
Derby’s bond rating was lowered from ‘AA’ to ‘AA-.’
However, the outlook for Derby is stable, an improvement from September, when Derby’s rating was hit with “negative implications” due to the state budget mess and low cash reserves.
S&P Ratings Direct notes Derby’s “weak budgetary performance,” with operating deficits in the general fund in fiscal year 2016.
S&P Ratings Direct again notes Derby’s 2016 low fund balance, which stood at 2.2 percent of operating expenditures — too low.
The report is embedded below. The article continues after the document.
In the weeks leading up to Election Day, then-candidate Rich Dziekan sounded alarms about Derby’s fiscal health, using a previous S&P Ratings Direct report as a framework.
Dziekan, a Republican, was elected Nov. 6, unseating two-term Democrat incumbent Mayor Anita Dugatto.
A reaction from the mayor was included in a press release from Derby City Hall late Tuesday:
“Grand List growth is key, and putting funds back into our low fund
balance is essential,” Dziekan said.
Dziekan said the addition of Big Y, the sale of city-owned properties, and an aggressive approach to development will restore economic growth and add money to the fund balance.
Derby City Treasurer Keith McLiverty, himself re-elected Nov. 6, noted that while a AA- is a strong rating, “the road to success is clear.”
Derby must concentrate on growing the grand list, attracting commercial development, and restoring the fund balance, McLiverty said in an email.
“Most importantly, we know the state cuts are coming, and we need to be positioned where we can absorb them,” McLiverty said.
The city treasurer also noted, as he has in the past, the important of regionalization to small communities such as Derby.
S&P Ratings Direct describes Derby’s economy as “strong,” and notes the city is poised to benefit from the long-anticipated widening of Route 34 (Main Street). But any additional economic development along Main Street and the redevelopment zone likely won’t be seen within the next two years.
The city’s budgetary performance was described as “weak.” Fiscal year 2016 saw the city field $400,000 in health insurance claims. The report later notes that the city underfunded its retirement plan (for employees not covered by state plans) by $277,000 in 2016.
McLiverty said the city funded 81 percent of the annual contribution, as planned.
“Management continues to examine ways to reduce costs, including partnering with other communities to reduce service redundancies, to ensure budgetary balance,” the report states.