Town sells bonds to finance infrastructure projects

Date: 10/18/2011

Oct. 17, 2011

By Chris Maza

Reminder Assistant Editor

LONGMEADOW — The town of Longmeadow sold of $17.7 million worth of bonds through competitive bid on Oct. 13 to finance two major projects.

According to Finance Director Paul Pasterczyk, the town has now completed its financing of the Longmeadow High School building project by selling $17.47 million in bonds toward the project.

“This is phase two of the financing of the high school project,” he said. “In the first phase, the town sold $27 million in bonds, so the sale fully finances our part of the project.”

Pasterczyk said the town was recently given a favorable credit rating by Moody’s Investor’s Service, which gave the town an advantage in selling the bonds.

“The higher the rating, the lower the risk to investors,” he said. “Our rating shows that buying our bonds would be a low-risk move for investors interested in buying.”

Longmeadow maintained its Aa2 rating in a report issued by Moody’s on Oct. 7. According to its website, Moody’s issues ratings on a scale of Aaa — minimal credit risk — to C — the highest credit risk, usually in default. An Aa rating denotes that the town is “judged to be of high quality and are subject to very low credit risk.” In addition, Moody’s uses numerical modifiers for Aa ratings through Caa ratings. An Aa2 rating suggests the town is in the mid-range of the low credit risk group.

“Having a high rating also means lower interest rates for the town, so by being fiscally responsible, the town has been able to save itself more money long-term,” Pasterczyk said.

Longmeadow was given the high rating largely due to the stability of its tax base, its manageable debt burden and its “track record of successful votes to exceed Proposition 2 1/2 limits.” The town’s wealth also played a large part in the score.

“Wealth levels exceed those of the state and the nation with per capita and median family incomes of $38,949 (150 percent of the state, 180 percent of the nation) and $87,742 (142 percent of the state, 175 percent of the nation), respectively. Additionally, equalized value per capita is healthy at $142,664 (164 percent of the national median),” Moody’s report states.

The town also sold $248,000 in bonds to help finance the town’s current water main projects on Primrose Drive, Bernie Road and Mayfair Drive, which were approved at the Annual Town Meeting on May 10.

Mains running beneath those roads have been there for 60 years, while some have been part of the infrastructure since the 1930’s, Michael Wrabel, director of the Department of Public Works, told Reminder Publications before the work began.

Pasterczyk indicated that by combining the two sales, the town was able to save money.

“There are fees associated with this process,” he said. “For example, Moody’s charges a fee for an updated credit rating, so if we were to sell these bonds separately, we would have to ask for and pay for two separate reports from Moody’s, so there is a clear advantage to combining the sales.”