EagleTribune.com, North Andover, MA

October 18, 2013

Lawrence's credit rating nudges up

By Keith Eddings
keddings@eagletribune.com

---- — LAWRENCE — Mayor William Lantigua has been endorsed for re-election by city firefighters and claims other endorsements ranging from cab drivers to hair dressers.

Yesterday, he got another slap on the back — although not an endorsement — from Wall Street, when a credit rating agency raised the city’s rating half a notch, citing its reversal of fortune under Lantigua, his budget director and the state-appointed fiscal overseer.

In an upbeat but cautious assessment that stressed the city still faces formidable financial and social challenges, Standard & Poor’s raised the city’s credit rating to A-, the agency’s third highest for a municipality.

The upgrade means S&P believes Lawrence has a “strong capacity” to pay its bills but would be stressed if the economy worsens. The half point uptick, from BBB, will allow the city to command more competitive interest rates when it borrows because it will be considered a better risk for investors.

A second Wall Street firm, Moody’s Investors Services, said it is leaving Lawrence’s rating unchanged at Baa1, which is eighth from the top on the agency’s ladder of 21 rankings.

S&P’s half-a-grade upgrade comes less than three weeks before the Nov. 5 election, when voters will choose between Lantigua and City Councilor Daniel Rivera, who as chairman of the council’s budget committee has put a microscopic focus on spending. Both scrambled to take credit for the upgrade.

“It’s hard to believe that after the mess I inherited, I would be announcing such a significant accomplishment today,” Lantigua said in a prepared statement, referring to the $21 million debt he inherited from former Mayor Michael Sullivan. “The tough decisions, the watchful eyes and our new internal controls have helped make this possible.”

The state gave Lantigua special permission to borrow to wipe out the earlier deficits and also allowed him to borrow $3 million more to cover the deficit in his own first budget in 2010.

Rivera credited the upgrade to the work of the City Council, state overseer Robert Nunes and Budget Director Mark Ianello.

“If I was the mayor, I wouldn’t be taking solo credit too fast,” Rivera said. “He doesn’t understand how one gets a credit rating changed as much as Bob Nunes and Mark Ianello.”

In fact, the state has full control over spending by both the city, where Nunes has veto power over its $81 million budget, and its schools, where state receiver Jeff Riley presides over the $156 million budget. The state also is providing $168.5 million in aid to the city and schools this year, equal to 71 percent of total spending.

The review of the city’s credit rating for its long-term, general obligation bonds was triggered by a new round of short-term borrowing that will occur Oct. 29, when the city will sell bonds worth $5 million to upgrade the public water system and eradicate a mold infestation at the Guilmette School.

Moody’s gave the short-term borrowing its highest of four ratings because the amount is relatively small and the bond would be paid off quickly, said analyst David Jacobson.

S&P’s rating for the short-term borrowing was not clear, but the agency cited several improving conditions as it nudged up its rating for the city’s long-term debt, including the three balanced budgets since 2010 and the projection of a $1.5 million surplus in the fiscal year that ended June 30. All three earlier budgets had multi-million-dollar surpluses.

S&P also noted that Lantigua this year was able to retain 31 firefighters he laid off in 2010, who were initially recalled using a $3 million federal grant but are now paid for by the city.

Both S&P and Moody’s referred to recent improvements in the city’s fiscal management, but were not specific. Since he began his oversight, Nunes urged the city to:

install meters at city parking facilities after parking attendant Justo Garcia was accused of skimming thousands of dollars in collections,

revamp procurement policies in the Police Department after Deputy Chief Melix Bonilla was indicted for allegedly swapping 13 city vehicles for four owned by a car dealer connected to Lantigua, and

install new computer software to track building inspections after inspector Larry Hester allegedly failed to report $33 million worth of development he approved over two years.

Both S&P and Moody’s also warned of the stubborn, long-term challenges that threaten the city’s tentative recovery, including its pervasive poverty, 15 percent unemployment rate, depressed property values and the $203 million deficit in the city’s pension obligations.

“Working in conjunction with the state-appointed fiscal overseer, Moody’s anticipates that the city will continue to make strides toward financial recovery,” analysts Thomas Compton and Nicholas Lehman said in their report. “Although several fiscal challenges remain, the active state oversight and the city’s demonstrated willingness to address its structural (budget) challenges are expected to provide near-term stability.”