Bond rating a 'win,' officials say

Norwell received a favorable rating from a credit risk company that has allowed the town to save money on interest it would have paid toward the $3.8 million Main Street construction bond and a new fire truck approved at Town Meeting in 2014.

Norwell Treasurer/Collector Darleen Sullivan said the town would save $68,000 on interest in just the first year of paying back the 15-year bond. The town had budgeted a conservative 4 percent interest rate, but actually received 1.725 percent rate, creating the savings in the fiscal year 2017 budget.

Sullivan admitted the 4 percent estimate was high, but said the actual rate was less than she expected.

“It’s a definite win,” Sullivan said.

Sullivan said the $3.3 million road bond would be paid back over 15 years, and the $500,000 fire truck bond would be repaid over five.

She said when the town took out money for the police station in 2014, it received a 2.76 percent rate on a 20-year $5 million bond, which she said was a good rate.

On Jan. 20, the town received the AAA rating from Standard and Poor’s Rating Services, a company that analyzes an entity’s financial security that would then affect the interest rates it can receive on bonds.

AAA is the highest rating the organization gives, and they base this designation on factors such as the demographic of the tax base, the town’s management policies and available funds in the budget. The report shows the town rating strong or very strong in all categories.

Finance Director and Town Accountant Donna Mangan said the high rating reflects prudent management and strong policies.

She said in fiscal year 2012, the town set a reserve fund policy and in fiscal year 2013, the town adopted a debt management policy which set an annual service debt floor of 2 percent and ceiling of 10 percent of the annual operating budget. The town analyzes its performance at the end of the fiscal year to determine whether it hit those goals. 

Sullivan said the town has held the AAA rating since before she began working there in 2013.

Town Administrator Peter Morin said it's important in determining Norwell's financial standing.

“It’s tangible evidence of the financial health and wellbeing of the town,” Morin said.

Morin said the low interest rate is good news for the town and individual taxpayers, because the money can be put toward other expenditures.

“The cost of borrowing will be significantly reduced,” Morin said. “When we reduce the cost of capital projects, it allows money that would otherwise have paid for interest to go toward other uses.”

Sullivan said the town considered when debt would retire and when the rates would be best to help decide when to take out bonds to help mitigate the impact on taxpayers.

“We talked about whether to do it now or wait. We waited and fared great because the interest rates went down,” she said.

Mangan agreed that the town’s decision to wait to take out the bond paid off.

“The town was fiscally responsible in its handling of the timing of the bond,” Mangan said. “The town is in great financial shape."

Follow Kaila Braley on Twitter @MarinerKaila.