May 07--CHAMBERSBURG -- A recent downgrading of Chambersburg's bond rating is not expected to affect its current debt obligations.
Moody's Investors Service on April 24 downgraded the Borough of Chambersburg's general obligation bonds to Aa3 from Aa2. The adjusted rating reflects the borough's moderately-sized tax base, below average resident income levels, satisfactory reserve position and modest debt burden, according to Moody's.
"This has no affect the borough's current loans or bonds," Borough Manager Jeffrey Stonehill said.
A lower credit rating generally means that a municipality will pay more to borrow on the bond market because investors perceive a greater risk, but in recent months Chambersburg and other municipalities have borrowed through banks instead of the bond market.
Since January, Moody's has been looking at adjusting the ratings of more than 100 U.S. municipalities and school districts. In March Moody's upgraded Adams County's general obligation rating to Aa3 from A1. The upgrade reflects the county's improved financial position following several years of positive operations and the sale of the county's nursing home, according to Moody's. The rating also incorporates the county's stable rural-residential tax base, average socioeconomic indices and moderate debt exposed to variable rates and swaps.
The Aa3 rating for Chambersburg and Adams County is in Moody's fifth highest category. Aa obligations are judged to be of high quality with very low credit risk. The "3" indicates a lower-range ranking. Aaa obligations are the highest quality and lowest risk.
"The new rating is almost the same as our previous rating," Stonehill said. "Meanwhile, our first quarter financial report was very strong. The borough is in a strong conservative fiscal position. While we improved our position in all measurable categories, the downgrade was a result of a change in Moody's methodology."
Moody changed the weight given various metrics, such as the health of the local economy and funding of a government's pension fund.
Moody;s assessed the borough's financial strength -- satisfactory reserves and a manageable debt burden -- as well as its challenges -- below average wealth levels and above average adjusted net pension liabilities.
The borough in 2013 borrowed $8 million from Farmers & Merchants Trust Co. instead of issuing general obligation bonds. The terms through the bank were more attractive. The money targeted improvements to the wastewater treatment plant, power lines from a methane gas-to-electricity plant and a facility for selling compressed natural gas.
The borough in February opened a $1.5 million line of credit with Farmers & Merchants Trust Co. to finance a green waste recycling center. The borough plans to purchase land on Commerce Avenue in Hamilton Township and install truck scales.
"We do not believe the change would have had any measurable effect on that borrowing," Stonehill said.
Jim Hook can be reached at 717-262-4759.
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