Moody's: Hamden Outlook Still Negative

One of the most prominent bond rating agencies has once again assigned a negative rating to the town of Hamden's credit, but town officials are hoping the upcoming sale of pension obligation bonds will change that.

On Aug. 20 the town will refinance millions in existing debt and bonds.

"Moody's Investors Service has assigned a MIG 2 rating to the town of Hamden's $16.475 million General Obligation Bond Anticipation Notes," the company said in a release Thursday. "Moody's maintains an A3 rating and negative outlook on approximately $119 million in outstanding long-term general obligation debt. These notes are being issued to provide financing for various town capital improvements, as well as emergency snow removal costs relating to a prior storm. The notes, as well as all of the town's outstanding debt, are secured by a general obligation unlimited tax pledge.

"The A3 rating reflects the town's very narrow financial position, a severely underfunded pension system and rolling deficits in the Internal Service Fund. The rating also incorporates the town's sizable, mature tax base and a moderate debt burden," it says. "The negative outlook incorporates Moody's expectation that the town will remain challenged to restore fiscal stability in the near term, given the limited revenue flexibility and competing demands for expenditures. Further, the outlook incorporates the uncertainty regarding the future of the town's severely underfunded pension system, and the town's ability to return to full funding of the actuarially required contribution and improve the funding status of the plan

The town does have strengths, the report notes, including:

• Sizable tax base

• Favorable demographic profile

• New pension valuation contains more conservative assumptions

• Recent approval of city council to issue pension obligation bonds

The weaknesses listed include:

• Internal Service Fund deficit net asset position

• Severely underfunded pension system

• Continued failure to fund the full pension contribution

• Narrow General Fund reserve position

• Limited revenue raising flexibility with ongoing expenditure demands.

"The outlook is negative, reflecting our view that Hamden will be challenged to restore stability to its financial operations, given the significant long-term liability from its underfunded pension plan. The outlook also reflects Moody's expectation that the town will struggle to reach full funding of the pension ARC due to competing demands and limited revenue raising flexibility."

The firm's opinion would change if the Pension Fund and General Fund is stabilized, it says, but could erode further if the deficit in the Workers' Compensation Fund increases or the Pension Fund and General Fund balances decrease.