Tewksbury's Bond Rating Raised to AA+ Status

Standard & Poor’s Ratings Services raised its rating of the town of Tewksbury’s general obligation (GO) bonds to ‘AA+’ from ‘AA’.

“We base the upgrade on sustained positive operating performance and the town’s formal adoption and integration of key financial management policies,” said Standard & Poor’s credit analyst Christina Marin in a press release issued Friday.

At the same time, Standard & Poor’s assigned its ‘AA+’ long-term rating to the town’s series 2015 GO bonds. The outlook for both ratings is stable.

A pledge of the town’s full faith and credit, subject to Proposition 2 1/2 limitations, secures the bonds. Marin says they understand proceeds will be used to undertake major renovations on the town’s water treatment plant and refund 2006 bonds for a net present value savings of $650,000.

The rating reflects Standard & Poor’s assessment of the following factors for the town:

• Very strong economy, with access to a broad and diverse metropolitan statistical area;

• Very strong management, with “strong” financial policies and practices under our financial management assessment methodology;

• Strong budgetary performance, with balanced operating results in the general fund and at the total governmental fund level;

• Strong budgetary flexibility, with an available fund balance in fiscal 2015 of 9.5% of operating expenditures;

• Very strong liquidity, with total government available cash of 30.6% of total governmental fund expenditures and 8.4x governmental debt service, and access to external liquidity we consider strong;

• Adequate debt and contingent liability position, with debt service carrying charges of 3.7% of expenditures and net direct debt that is 84.6% of total governmental fund revenue, as well as low overall net debt at less than 3.0% of market value and rapid amortization with 71.1% of debt scheduled to be retired in 10 years, but a large pension and other post-employment benefit liability and the lack of a plan to sufficiently address the obligation; and

• Strong institutional framework score.

The stable outlook reflects Standard & Poor’s view that Tewksbury’s very strong management conditions, very strong economy, and strong reserves that they believe should translate into consistent and positive operating performance into the near future.

Standard & Poor’s says they are unlikely to raise the rating in our two-year outlook horizon due to Tewksbury’s high pension and OPEB liabilities. Furthermore, although they consider the town’s economy very strong, wealth and income indicators are slightly below higher-rated peers.

Should financial performance deteriorate and reserves decrease, they could revise the outlook or lower the rating.

Read the full release here >>>