July 10 by Carol Britton Meyer
Town Administrator Tom Mayo recently shared some good news during the current economic downturn.
"I am extremely proud to announce that the Town of Hingham has received the highest credit rating of AAA from each of the three major credit rating agencies – Fitch, Moody’s, and Standard & Poor's – on our Series 2020 General Obligation Bonds to fund the acquisition of the Weir River Water System.
The transition from Aquarion Water Company to Town of Hingham ownership is expected to be complete by the end of July.
All three rating agencies cited the town’s conservative budgeting practices, prudent fiscal management, healthy reserve fund, and large tax base in their decision to reaffirm Hingham’s AAA rating.
Rating analyses included the following:
* Fitch: The AAA rating “reflects Fitch's expectation for the Town of Hingham to maintain healthy financial flexibility through both the current downturn and future economic cycles, consistent with a history of strong operating performance and sound reserves. The Town's robust financial profile reflects a wealthy property tax base, modest expenditure growth, and a demonstrated ability to reduce expenditures during economic downturns.”
* Moody’s: “The town's financial position is expected to remain stable over the next two years due to strong fiscal management and conservative policies. Annual operations in the past six years have produced year-over-year surpluses in the general fund. This trend, along with the strength of the management team, supports our expectation that the establishment of a water enterprise fund will be a self-supporting operation.”
* Standard & Poor's: “Hingham’s financial management team has a demonstrated history of producing year-end results that outperform the budget, through conservative underlying assumptions and in-year monitoring of performance. The town’s acquisition of its water system represents the culmination of nearly a decade of study, including external validation of financial models and projections. We believe the town is likely to show more than 1x coverage over the next three years, leading to our view of full self-support of this issuance and improvement in the debt profile."
According to Selectmen Chair Mary Power, the reference to coverage relates to debt service. "Basically, this refers to the water system's ability to pay the debt service on the acquisition debt, which is an indication of whether or not the water system is self-supporting (meaning it does not have to rely on the town to pay the debt service)," she said.
A ratio less than 1 means the water system may not be able to pay the debt service. A ratio higher than 1 means the water system is able to pay the debt service.
"The rating agency reviewed the projections provided by the town -- which indicated that the revenue generated from the sale of water will more than cover all expenses (including debt service)," Power explained. "Basically, the rating agencies are confirming the town's longstanding position that the water system will be self-supporting."
Mayo thanked the Selectmen and the members of the town's finance team -- Asst. Town Administrator Michelle Monsegur, Town Accountant Sue Nickerson, Treasurer Collector Jean Montgomery, Director of Assessing Rick Nowlan, and Assistant Assessor Erin Walsh –- "for their diligent efforts on behalf of the Town."
Mayo also express appreciation for Janet Morley and Richard Tortora of Capital Markets Advisors, as well as for bond counsel Rick Manley and Hingham's General Counsel John Coughlin, "for their invaluable advice and guidance along the way."
Power and fellow board members Joseph Fisher and William Ramsey were pleased to hear this good news. "Hingham is one of a few Massachusetts communities with a AAA bond rating from each of the three rating agencies," she told the Hingham Anchor. "To receive these ratings in the midst of a global pandemic is particularly gratifying."
Hingham's AAA bond rating means that when the town goes out to borrow for the purchase of the water system, it will be afforded the best rates in the capital market.