Moody’s notes City’s ‘ambitious’ economic development plans and conservative fiscal stewardship
Moody’s Investors Service has reaffirmed the City of Somerville’s highest ever long-term credit rating of Aa2, citing the city’s commitment to redevelopment, conservative budgeting approach and ample reserve levels, Mayor Joseph A. Curtatone announced.
Moody’s also assigned its highest rating of MIG 1 to the city’s short-term borrowing in its May 30, 2013 report. This effectively lowers the cost of borrowing for the approximately $22 million in bonds already approved by the city for a number of projects including the $8 million Union Square Revitalization Plan, school and municipal building renovations, the purchase of a ladder truck for the Fire Department and other capital needs.
“Taxpayers should know that the City of Somerville will continue to receive better interest rates on capital bonds, meaning it will cost the city and taxpayers less to fund current and future capital projects,” City Finance Director Edward Bean said. “Moody’s reaffirmation of our long-term bond rating means that the city can continue to finance projects that further solidify the city’s financial future, increasing revenues and realizing sustainable property tax relief.”
The report notes growth in assessed property value in each of the past three years, indicating stability in the housing market, along with large-scale developments underway such as the on schedule and on budget Assembly Square project that are growing the city’s total taxable value.
“The city’s equalized value has almost tripled to over $9.2 billion from $3.17 billion in 1998,” Moody’s said in the report. “To capitalize on Somerville’s desirable location and to facilitate future growth, city management has embarked on an ambitious economic development plan, including commissioning various feasibility studies to identify potential projects, rezoning initiatives to facilitate investment and pursuit of state and federal grant funds.”
“Playing the long game is paying off and Moody’s reaffirmation of our highest ever bond rating demonstrates the financial markets’ confidence in the City of Somerville’s approach,” Mayor Curtatone said. “We are stabilizing our financial position not through short-term gimmicks or budget cuts, but through smart, targeted investments that continue to unlock economic opportunities across the city and broaden our tax base without taking on too much debt at once. Moody’s validates this administration’s fiscal policy and the budgeting stewardship of our Board of Aldermen, which is paying off for taxpayers who can know the city is maximizing its financial position.”
Moody’s notes that the city’s General Fund balance at the close of fiscal 2012 was $41.6 million, “a healthy 21.3 percent of revenues,” which further demonstrates the city’s growing local economy. The rating agency also noted that the city saved millions by moving employees’ insurance to the Group Insurance Commission (GIC).
“It is anticipated that Somerville’s debt position will remain manageable due to its modest net direct debt, rapid principal retirement, and affordable planned future borrowings,” Moody’s said in the report. “Based on the city’s strong bid history and long-term credit strength, Moody’s believes that the city will have sufficient access to the capital markets to permanently finance or renew the notes at their June 2014 and October 2013 maturities.”