The municipal credit rating agency S&P Global Ratings has affirmed Bedford’s superior bond rating of AAA, the highest attainable.
The designation translates into savings for Bedford taxpayers, explained town Finance Director Victor Garafalo. Specifically, he said, there will be more competitive bids for bonds issued by the town, which means a more favorable rate. “If you are borrowing $6 million, a quarter of a percentage point is a huge difference over the course of the bonds.”
The bond rating helps define “how investors and lenders look at your community,” Garafalo continued. For example, there were 11 bidders for the refinancing approved by the Select Board this week. “The higher the rating, the more bidders you are going to get, and the more favorable rate.”
“I think the AAA rating is a statement that the town continues to manage its financial affairs in a strong and thoughtful manner,” aid Finance Committee Chair Ben Thomas. “We should all recognize that this comes about as the result of constant effort and with a view to both short-term and long-term issues. “
Garafalo informed the Select Board of the reaffirmation at this week’s meeting.
“A lot goes into realizing a Triple-A rating,” Garafalo said. “It begins with financial management – how we go through our budgeting process, how we work hard at keeping good reserves and how we use them. They look very positively at how we look to the future, such as the six-year capital plan, and how hard we work to maintain our infrastructure, the assets of the town.”
Additional important components are debt, reserves, and assigning funds to offset future Other Post-Employment Benefits (OPEB). “They look at how we are following and achieving reserve policies. We are pretty much exceeding them,” Garofalo said.
The process begins with detailed data forwarded to the service — not only the capital plan, but also financial documents as detailed as water rates, local receipts, and debt repayment schedule. followed by a “rating call” with S&P, the finance director, and Town Manger Sarah Stanton.
The call came on July 21. “They asked a series of questions – how the local economy is, any new development, plans for debt. We talk about delinquencies and collection percentage (we have almost 100 percent collected), tax title balance, and how we plan to close fiscal year 2020,” Garafalo recounted.
Garafalo said the interview included details on how town government is dealing with the pandemic and its impact on financial planning. “We explained how we evaluated the impact on revenue sources like local receipts and state aid and how we approached that in our projections. We talked about the impact of the cost of having to outfit with PPE, and the money expected from federal agencies.”
The town has been rated AAA by the service for more than a decade, and “our financial status s has improved tremendously since that started,” Garofalo said.
The rating agency cited the town’s many strengths as positive credit factors – the local economy, management, financial policies and practices, budgetary flexibility, liquidity and debt, and contingent liability profile.
“All of the town employees and volunteers involved in financial matters deserve our thanks for the results they deliver year after year,” Thomas said.