Belmont’s ‘Triple A’ Worth Millions In School Bonding Market

Photo: Selectman Mark Paolillo signing the 30-year bond note.

Some may ask what’s the big deal if Belmont is a double or triple A? “Is there any real difference by having an added A to your name?” referring to the agencies which assign credit ratings for issuers of debt obligations, or bonds.

In Belmont’s case, that single letter was worth a cool six million in savings to property owners, according to Belmont Town Treasurer Floyd Carman who attended the Board of Selectmen meeting on Monday, March 18.

“Let me start by saying we should all be proud of these results, we all contributed,” said Carman, referring to town and school officials and the board.

“This is why it is important for people to know the importance of the triple-A bond rating,” said Board Chair Adam Dash. 

Carman’s Monday visit was for the three-member board to sign off on 30-year bond notes that took place on March 12 totaling $108,100,000 that included $100 million in the first of three payments to build the new 7-12 school building which starts construction this June, $7.4 million for the renovation and expansion of the Belmont Police Department police station and $700,000 for the multi-year water main replacement program. The bonds attracted seven bidders and were sold at a 3.31 percent interest rate locked in for 30 years to JP Morgan.

Yet Belmont will only be financing $102,030,000 of that debt. According to Carman, the difference of $6,070,000 is what the town received in “premium money.”

“This is the best possible outcome you could have had with a sale of bonds,” said Dash, which Carman called a combination of “luck and our excellent ratings.” The luck part due to timing as recent actions by the Federal Reserve Chair Jerome Powell in stop hiking up the discount rate which impacts interest rates.

For instance, Belmont taxpayers will not be financing $100 million for the new school, but $94,428,000, which will result in a savings of $1.2 million from the town’s operating budget. Preserving the town’s AAA rating will “save” taxpayers between $50 to $60 a year from the initial cost projection for the school project.

Belmont’s credit score was confirmed by two rating agencies – Moody’s and Standard and Poor’s – which assessed the town had an exceptional degree of creditworthiness and could easily meet its financial commitments. The highest rating is a rare honor as only 9 of 350 cities and towns in Massachusetts hold a AAA rating. 

The process of retaining the bond rating began in February when the town’s finance team made up of Carman, Town Administrator Patrice Garvin, Town Accountant Chitra Subramanian, Assistant Town Administrator Jon Marshall, Belmont Assessor Dan Dargon, School Department Director of Finance, Business and Operations Tony DiCologero and Glen Castro, the town’s budget analyst, spent the better part of the day on rating calls with S&P and Moody’s, answering questions “to make sure this financing was first rate.”

“They really harped on good financial management and good fiscal and retirement policies. They don’t want any surprises,” said Carman, who told one of the rating agencies last April that the town was coming in with the three large projects.

“It’s a team effort,” said Carman on gaining and then maintaining a triple-A rating. “You have to have all your key financial people together. This didn’t just pop up overnight. We’ve been planning for this for two years.” 

Paying for the debt on the bonds will see real estate taxes increase annually by $760 on the average single family home (in 2019 valued at $1,090,000) effective on Jan. 1, 2020.

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

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.