FROM: Carter Terenzini, Town Administrator
RE: Upcoming Borrowing
DATE: November 1, 2017
CC: C. Richardson; K. Pontbriand; M. Carney
Our financial advisor has had preliminary conversations with Moody’s Investors Service relative to our seeking a rating for the Bond Anticipation Notes we are about to seek bids on. For Municipal notes the ratings are as follows:
MIG 1, best quality
MIG 2, high quality
MIG 3, favorable quality; and
MIG 4, adequate quality.
The initial reaction is that we will not be able to obtain a MIG 1 rating. There is a strong possibility we can achieve a MIG 2 rating but that is never certain until one formally submits the documentation for review. Even if we achieve a MIG 2 rating it is at least .25% above the interest rate of a borrowing rated MIG 1 rating. Our advisor has recommended, and I agree, that we not seek a formal bond rating at this time but instead finance our needs through unrated bank notes.
The maximum for this in this calendar year will be $10,000,000 which is more than enough to cover our needs ($5M BAN, $1M Police, $2.3 Sewer, $1.7 new money). This gives us $5.4M+/- for the school in CY ’18. We will then seek an additional $10,000,000 in CY 2019 and continue to work toward an acceptable bond rating as your financial picture slowly improves.
This approach will take continual monitoring of your cash flow needs and does not deflate the opposition to the projects based upon their concerns over our financial condition. However, it lets us get the projects underway, is not a negative of having submitted and not achieving a prime rating, buys us some time to improve how your financial condition is viewed by others, and keeps the pressure on to continue to make – and effect – the hard-financial choices that are needed to bring about longer term financial stability.
With respect to the actual bonding itself, Moody’s indicated that the underlying rating would be an A2. Moody’s could not get the Town to the highest note rating due to the amount of debt authorized and the lack of a cash coverage ratio to pay the notes off if you couldn’t issue Bonds. This is a highly unlikely scenario, but that’s their criteria. For your information I have attached a graphic for the Moody’s Bond rating system so you can see how A2 would compare to the overall rating system for investment-grade issues.
5 million + 1 million +2.3 million + 1.7 million = 10 million, so 10 million is more than enough to cover our needs (Templeton needs?) I seem to remember a 5 million dollar BAN being mentioned at the audit report, along with the words, "do not spend it" - more paid for advice being ignored and yet no selectmen speaks up on this? No selectmen speak against this? You have or will have bills totaling 10 million dollars and yet the words of the part time town administrator are "more than enough to cover our needs" Apparently those very aggressive things on a very aggressive schedule did not materialize. I an already see all the bobble heads nodding at Town Meeting, just the old pictures of the soviet politburo on the nightly news. Yes sir ree bub, Tempeton is moving ahead!