Barnstable reaffirms ‘AAA’ bond rating

March 03--It's all in the timing.

Barnstable's No. 1 number-crunchers helped earn the town a "AAA" bond rating from Standard & Poor's, the highest municipal bond credit rating possible.

Or, more specifically, they helped the town reaffirm its "AAA" bond rating during a recent bond issue.

Barnstable Treasurer Debra Blanchette announced March 1 that the town received competitive bids Feb. 13 for a $9.87 million, 20-year bond issue and a $2.5 million, one-year taxable note.

Standard &Poor's Global Ratings, a municipal bond credit rating agency, cited the town's very strong economy; very strong management with strong financial policies and practices; very strong budget flexibility; and very strong liquidity, Finance Director Mark Milne said March 1.

In addition, the agency cited strong budgetary performance; strong institutional framework; and strong debt and contingent liability profile as positive credit factors.

"Deb does all the legwork in pulling together the documentation required to issue the bonds," Milne said. "She works closely with our financial advisors and bond council to make a successful bond issue happen."

"This is a collective effort," he added. "Starting with our elected officials, there's a mindset that strong financial planning and maintaining adequate reserve levels leads to a strong financial position. Everybody's involved, from the top of the organization to every department manager, every division manager."

The town received a total of 10 bids on the bonds and five bids on the notes, Blanchette said. Janney Montgomery Scott LLC was the winning bidder on the bonds, with an average interest rate of 2.73 percent. Century Bank was the winning bidder on the notes, with a net interest cost of 2 percent.

Milne said the bond issue will be used to finance FY 2018 capital projects.

"Every year, a large portion of our capital budget is financed thru the issuance of bonds," Milne said. "It gives us the cash to go ahead with construction. The bond we just issued financed the 2018 Capital Improvement Plan."

Milne said the process is akin to a person's taking a construction loan from a bank to build a house.

"We borrow money to do our major capital improvements," he said. "Our AAA-bond rating is our credit check. It's the highest credit rating a municipality can receive. In terms of dollars, that means we can borrow money at a lower interest rate due to a strong credit rating."

A frequently-asked question Milne said he gets is "how much cheaper can you borrow money for?"

"In times of economic stress, like 2010-2011, a AAA rating could translate to as much as a 1-percent decrease in your borrowing rate, saving you thousands of dollars of interest costs over the life of the loan," Milne explained.

"During stronger economic times like we're in today, it's probably closer to a quarter of a percent, which saves you thousands of dollars over the life of a multimillion-dollar loan."

Not coincidentally, the town's $33.9 million, FY 2019 proposed Capital Improvement Plan debuted online earlier this week, along with a $249 million, five-year combined total.

"We submitted it to the Town Council Monday with our budget calendar, as well as a five-year plan," Milne said. "We are currently developing the (FY 2019) Operations Budget. The proposed operating budget will be submitted at the end of April."

Which is good timing, since the fed is expected to raise rates, and the interest income paid on municipal bonds is exempt from federal tax.

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