Good news from today’s Metrowest Daily News:
Despite concerns over a possible downgrade, a recent evaluation has maintained Southborough’s long-term bond rating, which will save the town a lot of money when it refinances school debt.
Finance Director Brian Ballantine said yesterday that he is very pleased that Standard & Poor’s maintained the town’s AA+ bond rating — a rating towns receive from one of three national credit rating agencies that affects interest rates on loans.
“It’s good news because it saves the town money” and is an indicator of financial strength, Ballantine said.
Read the full article here.
This is good news, but not surprising.
During the 10 years ending in 2006 the Town maintained average cash balances of $2.9 million in so called “Stabilization Funds”. This policy took money from “high cost of money” consumer/taxpayers and transferred it to a “low cost of money” municipality, the Town. There was a claim voiced by the then Board of Selectmen that it was advantageous to citizens to vote higher taxes to keep high cash balances such as these, because otherwise the bond rating would drop and this would impose a higher cost than the cost of funding the balances.
Analysis by Advisory Committee of 112 Massachusetts communities, their bond rates and cash balances, showed that bond rates were tied to community income, not to cash balances, and that, in any case, citizens could never benefit financially from keeping higher balances at the Town, even if the bond rate moved. Although hotly debated year after year at Town Meeting, and as recently as about 2 years ago on this blog, voters sided with Advisory Committee’s analysis, returning this money to themselves.
Over half-dozen years these Town Meeting decisions resulted in about $4 million in reduced tax collections from homeowners as cash balances came down to the recommended $400,000 level.
As predicted by the analysis of data from 112 other Towns, there has never been a change in the Town’s bond rate over the entire period.
Nice work, John. And let’s give credit to you for the rigorous analysis and rationale.
It would be interesting to go back and review the arguments on both sides. As I remember, there were several points of view that this would lower our bond rating (it was like the argument that if you do not pass the school budget……well you know the rest). Mr Butler certainly deserves a tip of the cap and thank you. His analysis backed up with data were certainly on the mark.