Belmont Saves Millions Waiting To Sell $100M Bonds On Middle/High School, Police HQ Projects

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Photo: The Belmont Police Headquarters renovation.

Patience is a virtue and, in the case of Belmont, a way to pocket a few million dollars.

By holding off selling more than $103.5 million in municipal bonds on a pair of building projects from March to May, Belmont will reap a $6 to $7 million savings to taxpayers, according to Belmont’s Town Treasurer Floyd Carman as the Belmont Select Board voted to approve the bond sale at its remote meeting on Monday, June 1.

Originally, the sale of the triple-A rated, 30-year municipal bond to finance a portion of the $240 million Belmont Middle and High School project and the Police Headquarters renovation was schedule for mid-March. At the time, the financial markets began reeling due to the start of the coronavirus pandemic. Initial interest was anemic; just two firms showed any

Rather than chance an auction during rising volatility in the market, Carman pulled the paper and proceeded to reaffirm the town’s top status with the credit rating agencies.

Due to its long-standing policy of conservative budgeting and spending, a small default rate by homeowners and a willingness to payoff long-standing debt and keeping cash reserves – free cash – above what agencies require, Belmont is seen as having a high level of creditworthiness resulting in the coveted top ranking.

Belmont is one of just 11 municipalities in Massachusetts and one of fifty nationwide in which two of the three rating agencies – Moody’s and Standard & Poor’s – declared its “paper” at a AAA rate, the highest possible rating that may be assigned to an issuer’s bonds.

“We are truly in a category of our own,” Carman told Select Board Member Tom Caputo.

By retreating to the sidelines, Belmont could afford to bide its time toward a recovery and a more receptive market.

By late May, according to Carman, the number of bidders drawn to Belmont’s triple-A muni spiked to 10 and the resulting auction resulted in a “fantastic rate” of 2.178 percent – sold to JP Morgan Securities – a whopping 1.124 percent decrease from the 3.302 percent the town received at last year’s $111 million bond sale to support the middle/high school.

“Let me thank Carman for just a wonderful job … bringing these bonds to market and achieving a terrific result that the auction,” said Select Board Chair Roy Epstein who noted the sale occurred during the depressed state of the bond market in the last few months.

Triple ‘A’ Play: Belmont Again Receives Highest Credit Rating

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Photo: Town Treasurer Floyd Carman

On April 14, Belmont once again received the coveted Triple A (Aaa) credit rating from Moody’s Investors Service.

Belmont joins some select company, being one of only 14 Bay State municipalities (out of approximately 350 communities) with a triple-A ranking, including Bedford, Boston, Cambridge, Lexington, Wayland and Winchester.

The reason Belmont continues – now in its second decade holding a Aaa rate – to secure the gold standard of credit ratings is relatively straightforward, according to the official in charge of Belmont’s fiscal health.

“Hard work and solid prudent disciplined financial management is the recipe” for earning the top ranking, said Floyd Carman, the town’s treasurer and tax collector.

In Moody’s view, the rate derived from the town’s strong fiscal foundation.

 “The Aaa rating reflects the town’s healthy financial operations and reserve position, a moderately-sized tax base with strong wealth levels and close proximity to New England’s largest employment center, and manageable debt burden. The rating also incorporates aggressive funding of its moderate pension liability,” Moody’s wrote in April.

A municipal bond rating is a measure of the creditworthiness of a town or state, similar to credit ratings for individuals. The better the bond rating, the lower the interest rate.

For Belmont residents, maintaining the top rating will be crucial as the town moves closer to renovate and building new construction at Belmont High School and other debt-heavy capital projects in the near future.

“Maintaining this rating through the [High School] financing timeline of fiscal                                                                                                            2019-2021 is important,” said Carman. 

“The financial benefits depend on the interest rates and reoffering premium payments could save the town $2 million over 30 years.”

While Moody’s forecasts Belmont’s fiscal future as being “stable” over the near term, it points out factors that could lead to a downgrade including:

  • Multi-year trend of operating deficits resulting in reserve declines,
  • Substantial growth in the debt burden, and 
  • Failure to address long-term liabilities.