Local officials were ecstatic with the news that Standard & Poor’s had increased Chelsea’s credit rating to AA- last week – one of the highest tier municipal credit ratings.
“We’re thrilled,” exclaimed City Manager Jay Ash, who led the effort to increase the City’s rating from A+. “There are many positive signals as to the direction our City is heading, but none may be as universally understood and admired as a credit rating increase.”
Said Council President Dan Cortell, “To get bumped-up into the AA category, especially in these tough times for government finance when many are just hopeful to hold on to what they’re already rated, means we’re succeeding in finance, management and overall community well-being.”
Councillor Brian Hatleberg said the City has succeeded in responsible spending by finding new ways to pay for service.
“We’ve been working those areas (stated by Cortell) and others, have been thoughtful about every penny we spend and innovated in finding new ways to pay for bettering services,” he said. “Our economic development activities are the best in the state, and the efforts of both elected and appointed government have been beyond reproach. I’m therefore not surprised that our rating has been increased. Having said that, I’m sure happy that others, like S&P, are seeing us for the accomplished City government we have become.”
S&P rates entities like businesses, medical institutions and all levels of government prior to those entities issuing bonds to finance capital improvements. Credit rating agencies pick apart a municipality’s balance sheets, financial plans and managerial capabilities in order to advise investors buying the bonds about the credit-worthiness of the municipality.
Chelsea is currently seeking to raise $2.3 million to finance water and sewer repairs and other capital improvements. In assessing the City’s ability to repay any debt incurred, S&P’s rating suggests Chelsea’s future outlook is stable, and that the City has a strong capacity to meet all financial commitments.
‘I’d say that is an accurate statement,” said City Councillor Leo Robinson, who serves as the Council’s chairman of finance. “Over the last 20 years, we’ve gone from Receivership to being one of the area’s strongest and most successful municipalities. It’s taken a lot of hard work, continued focus and, frankly, a bit of luck, but even on the luck side of things we’ve put ourselves in a position to capitalize on opportunities when they arise.
“It’s a good feeling every time and quite often I hear how others now regard our community,” he continued.
Chelsea’s new rating seemingly puts it on par with communities like Beverly, Melrose and Somerville and varying levels above Everett, Malden, Medford, Revere and Winthrop, some of whom are rated by S&P and others who have opinions on a different scale from Moody’s Investor Services. Boston has an AA+ rating and Cambridge exceeds all with an AAA rating. The City’s elevated rating means that borrowing costs will be lower in the future.
“We don’t borrow a heck of a lot, but, when we do, it’s always nice to pay less for the money we raise,” noted Ash, who reported that $40,000 will be saved on the repayment of the debt being issued as a result of the new rating.
Ash says he hopes for further increases down the road.
“We’ve come a long way, but there are still three ratings higher we can reach. In order to improve, we need to continue to strengthen our bottom line, lengthen our track record of success and address the shortcomings that still hold us back, albeit at this new higher level which the City has never reached,” said Ash.
S&P cites the City’s weaknesses as still high poverty among many residents, and a high level of outstanding obligations for pension and health insurance costs for municipal retirees, both current and future.
“We continue to seek new ways to improve the financial outlook of our residents, even if many of the issues of poverty are beyond our full control to impact,” said Ash. “On our outstanding obligations, though, that’s squarely on our shoulders and a reason why we need to keep other areas of spending down. Although almost every other community is in our boat, owing hundreds of millions of dollars for pension and retiree health costs going forward, we take no comfort in that and are continuing efforts to reduce those future liabilities.”
Despite the negatives, S&P hailed the City’s “location and participation within the deep and diverse Boston metropolitan area; experienced financial management; stable and predictable revenue profile, and low overall debt burden” as credit strengths.
“Again, not everything’s perfect and heaven knows we have a lot more to do before we can declare ultimate success,” said Ash. “But, today, we can declare we’re being successful, and each time we break ground on a new hotel, drop our crime rate, open a new park, send a CHS graduate off to an Ivy League school, work collaboratively instead of at odds, and produce a balanced budget, so much more good can then come next.
“I’m pleased where we are and eager to accomplish even more,” he continued. “Our future is rightly full of hope because we have and will continue to do everything possible to continue to turn that hope into achievement. This bond rating increase validates what we’ve been doing and gives us every reason to stay on the same path towards our next reason to celebrate.”