West Hartford Maintains AAA Rating, Sells General Obligation Bonds at Competitive Rate

West Hartford Town Hall. Photo credit: Ronni Newton

The Town of West Hartford has earned the highest designation from the nation’s top bond rating agencies since the mid-1970s.

By Ronni Newton

West Hartford’s triple-A bond rating, which the town has earned each year since 1974, was reaffirmed last week by both Standard & Poors and Moody’s Investment Services, with both of the nation’s top bond agencies also assigning the town a “stable” outlook.

On Tuesday, the Town of West Hartford received 12 bids, and sold $15 million of General Obligation Bonds at a very competitive interest rate, Chief Financial Officer Peter Privitera said. “At today’s bond sale, the town received 12 bids with the lowest bid coming in at 2.005909, which is an excellent indicator of the town’s strong financial condition.”

Before assigning the bond rating, agencies undertake an in-depth analysis of a municipality’s current financial position, as well as the municipality’s financial projections and strategic planning, and the overall outlook for the geographic area. Earning the highest bond rating is an indication to institutional investors that the town is low risk, and the “stable” outlook is an indication that rating agencies don’t see anything that will interrupt the positive trajectory. The top ratings lead to the ability to secure the best possible interest rates when bonds are sold.

Privitera said the affirmation of the AAA rating (Moody’s uses “Aaa” but they are both the highest ratings) “is a recognition of sound financial management, along with positive fiscal and economic attributes the town possesses.”

Bonds sold this week, Series 2022A, will be used by the town to fund projects in its capital improvement program, including updates to streets, investments in schools and other municipal buildings including security, stormwater management infrastructure, and acquisition of the new Elmwood Community Center.

Town Manager Matt Hart noted that reaffirmation of the top rating is a reflection of “West Hartford’s vibrant economy, sound and conservative fiscal strategies, and long-range plans for infrastructure improvements, all desirable factors to the credit rating agencies.”

West Hartford is among 1% of cities and towns nationwide to earn the top bond rating, and one of only a select few to have consistently achieved triple-A status.

“We are very proud and pleased to be awarded this prestigious distinction for our strong and solid financial strategies and management,” Mayor Shari Cantor said. She also noted the remarkable increase in the town’s Grand List, which grew by 12.2% with across-the-board increases in real estate, motor vehicles, and personal property. “Home values remain strong and West Hartford continues to attract people from nearby major cities,” she said.

In assigning its Aaa rating, Moody’s noted that the “rating reflects the town’s substantially sized tax base and strong income indicators, which have both remained strong and not materially impacted by the pandemic. The town’s key economic strength remains its robust local housing market that benefits from being equidistant from New York City and Boston.”

Moody’s also highlighted that the town “maintains significant reserves outside the general fund that can be used to support operations.”

In the credit overview accompanying assignment of the AAA rating, S&P noted: “West Hartford has a very strong set of financial policies and controls that are institutionalized and embedded into its overall financial management, which, in our view, is a key factor contributing to its ability to sustain budgetary balance through various economic cycles. The town maintains a steady pace of modest economic growth as construction-related development has been largely unaffected by the pandemic, and the level of economic deterioration in the region is less severe than the national base-case forecasts.”

S&P also mentioned the town’s recent issuance of pension obligation bonds as a means of fully funding previous unfunded actuarially accrued liability. “While the debt costs will increase in fiscal 2022, the town’s pension costs will substantially decrease, resulting in little to no budgetary effect in the beginning. Management also reduced the discount rate of the pension plan to a more conservative 6.25% and will establish a pension bond reserve fund. In terms of credit, we understand these actions limit the budgetary effects of future cost volatility to operations in the event of adverse investment returns.”

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