EagleTribune.com, North Andover, MA

December 4, 2013

Bond rating upgrade will save money

Rating raised to highest level in city history

By Shawn Regan
sregan@eagletribune.com

---- — HAVERHILL — A key Wall Street financial agency has raised Haverhill's bond rating by two notches to its highest level in history, an upgrade the mayor said will save the city $400,000 in future interest payments on the proposed new school in Bradford and potentially millions more on other loans.

Mayor James Fiorentini said the city has not yet calculated how much might be saved on the city's largest borrowing obligations, such as the bonds it takes out annually to pay debt on the formerly city-owned Hale Hospital or to cap the old city landfill.

The potential $400,000 savings on a new city school is based on the city's $23 million share of a $60 million project. The state is expected to pay the larger amount.

"We're going to refinance anything we can at our new lower rate," Fiorentini said. "We don't know for sure yet what we can refinance and exactly what the savings will be, but it's going to be substantial."

A city's bond rating is similar to a credit rating for an individual. A higher bond rating means it will be less expensive to borrow money.

The mayor said the upgrade was the result of a detailed financial presentation and tour that city officials gave to representatives of the Standard & Poor's bond rating agency last month. He said the agency called him Tuesday morning and told him it was increasing the city's rating from A-plus to AA — a rare two-level increase.

Fiorentini said this is the fourth time since he took office in 2004 that Standard & Poor's has raised the city's bond rating. Ten years ago, he said, Haverhill had a bond rating of BBB, which at that time was the worst bond rating of any city in Massachusetts.

The low 2004 rating was primarily the result of $85 million in debt the city assumed when it sold its financially struggling municipal hospital in 2000. The city is paying the so-called Hale debt, which includes mostly pension and health care costs for former hospital workers, through 2020.

Standard & Poor's report on the city's financial condition said the new "short-term rating reflects our view that Haverhill maintains a very strong ability to pay principal and interest when the notes come due."

"We view the city's management conditions as very strong, with strong financial practices that are likely sustainable," the agency's report said.

Standard & Poor's also cited the improved economy and noted a number of large downtown housing developments that have bolstered the city's tax base.

The financial review gives the city the highest possible rating for good management practices and recognizes the city's recent success at building up cash reserves. It also cited the city's ability to negotiate money-saving health care reforms with its labor unions.

The report also credits the city's use of multi-year budgetary planning and better building maintenance, two things the City Council has been pushing.

"Five-year budgets and building maintenance isn't always exciting, but it's important," Councilor John Michitson said. "And if the mayor can use it to improve the city's bond rating and save us money, I'm all for it."

Michitson said the council's resistance to previous efforts by Fiorentini to defer portions of the Hale debt was likely also a factor in the improved bond rating.

"By not putting off any of the Hale debt, we showed that we are committed to paying off our debts as fast as possible," Michitson said.