By John Anderson
Yesterday, the Town of Auburn was notified by Moody’s Investors Service that they have upgraded Auburn’s bond rating from Aa3 to Aa2. This action will have an immediate positive impact on the town when it issues new bonds on September 1st.
A press release from the town reads:
“The rating upgrade reflects the Town’s improving financial position over the past five years bolstered by strong fiscal management. The Town’s improved financial position is marked by steady growth of fund balance and cash reserves with a commitment to addressing its pension and healthcare liabilities. The bond rating upgrade highlights the improved financial strength of the Town resulting from the adoption of strong Financial Policies, Five Year Budget Forecasts and Multi-Year Capital Projections, as well as implementation of reforms with emphasis on fiscal discipline. The upgrade will result in lower borrowing costs for the Town’s current and future debt needs, which translates to savings in taxpayer dollars.”
In anticipation of issuing $21.1 million in new municipal bonds and around $5 million in Bond Anticipation Notes, Auburn’s financial management team along with their financial advisors from Unibank held conference calls last Thursday with analysts from both Moody’s and Standard & Poor’s.
One year ago, Moody’s gave Auburn a “Positive Outlook” classification which indicated a likely improved bond rating within two years. Earlier in 2014, Standard & Poor’s upgraded Auburn to AA+, and another upgrade is unlikely this year. The AA+ and Aa2 ratings are only one step from the best possible municipal bond rating which is a terrific accomplishment for the financial team in only a few years.
Town Manager Julie Jacobson told Auburn Mass Daily, “There will be a direct positive impact with better interest rates.” It is anticipated that the new rating will save the town $22,000 per year on each $1 million borrowed. The savings may not seem huge, but for the next ten years, it will nearly equal the payments for the debt incurred to purchase the Southold Rd. property earlier this year. That $2.865 million will be paid off in ten years.
About Auburn’s Financial Plan, Jacobson said, “This is a long-term effort, and we need to stay the course. With reduced interest rates, there is less money that we have to raise through the tax levy.”
In March of 2014, an improved bond rating allowed the town to refinance the debt on the high school which saves taxpayers $300,000 per year until the debt is retired in 2024.