Understanding Groton Government
Thu, 03/05/2020 - 5:16pm Heraldgroton
Even with regular news coverage of town government operations and budgets, it is hard to know how well our town is being managed relative to other towns. Is our money being carefully and efficiently spent, not wasted? Generally, the public has a healthy skepticism of government claims of what a great job their town government is doing, thus making a fair-minded assessment difficult.
As difficult as it is to find an objective viewpoint without some taint of personal or institutional advantage, the recent S&P Ratings summary of town financial performance is a good marker. This report, awarding Groton AAA/Stable Bond rating for $6.25 million of Government Obligation Bonds dated 02/20/2020, due 02/15/2041, is about as close we can get to an objective analysis of our town government performance as we are likely to get.
As you will see in the excerpt below, taken from this S&P report prepared for the recent round of borrowing, analysts Christian Richards and Krystal Tena are unreservedly complimentary of the strength and stability of Groton’s town financial performance, particularly praising the town’s ‘strong management’ and ‘very strong financial policies.’ The report also praises Groton’s ‘strong budgetary performance’ and ‘strong budgetary flexibility,’ ‘very strong liquidity’ and excellent ‘debt and contingent liability profile.’
Town Manager Mark Haddad, his financial team, and the Groton Finance Committee all deserve praise and thanks for achieving these outstanding results and consequent AAA Bond Rating.
Excerpt From S&P Rating Of Town of Groton For $6.25 Million of Municipal Bonds
“Groton's comprehensive budget development process and emphasis on long-term capital and financial planning result in consistent financial performance. The primarily residential town is seeing continued appreciation in its tax base, along with material new commercial development.
We believe its pension and other postemployment benefit (OPEB) costs could pressure the budget over the long term, along with significant debt plans for a new elementary school. However, we currently expect management to incorporate these rising costs into the budget, without pressuring reserves or liquidity.
"The long-term rating further reflects the following factors for the town:
• Very strong economy, with access to a broad and diverse metropolitan statistical area (MSA);
• Very strong management, with strong financial policies and practices under our Financial Management Assessment (FMA) methodology;
• Strong budgetary performance, with a slight operating deficit in the general fund but a slight operating surplus at the total governmental fund level in fiscal 2019;
• Strong budgetary flexibility, with an available fund balance in fiscal 2019 of 11.7% of operating expenditures;
• Very strong liquidity, with total government available cash at 20.3% of total governmental fund expenditures and 5.0x governmental debt service, and access to external liquidity we consider strong;
• Strong debt and contingent liability position, with debt service carrying charges at 4.1% of expenditures and net direct debt that is 54.4% of total governmental fund revenue, as well as low overall net debt at less than 3% of market value, but significant medium-term debt plans; and
• Strong institutional framework score.
"S&P Global Ratings assigned its 'AAA' long-term rating to Groton, Mass.' series 2020 general obligation (GO) municipal-purpose loan bonds. At the same time, we affirmed our 'AAA' rating on the town's outstanding GO debt. The outlook is stable.
Security and Use of Proceeds
"The town's full-faith-and-credit pledge, subject to limitations of Proposition 2-1/2, secures the series 2018 GO bonds.
While the town voted to exempt a portion of the 2020 bonds from Proposition 2-1/2 levy limitations, we have not made a rating distinction between the town's limited-tax GO pledge and its general creditworthiness. Despite limitations imposed by the commonwealth levy limit law on a portion of the bonds, the tax limitation imposed on the town's ability to raise revenue and the fungibility of those resources are already embedded in our analysis of its financial and economic conditions.
"Groton's GO debt is eligible to be rated above the sovereign because we believe the town can maintain better credit characteristics than the U.S. in a stress scenario. Under our criteria, titled "Ratings Above The Sovereign: Corporate
And Government Ratings—Methodology And Assumptions" (published Nov. 19, 2013, on RatingsDirect), Groton has a predominantly locally derived revenue source, with approximately 86% of general fund revenue coming from property taxes. The town also has independent taxing authority and independent treasury management from the federal government.”
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