News Column

West Haven bond rating affirmed with stable outlook

July 24, 2014

By Mark Zaretsky, New Haven Register, Conn.

July 24--WEST HAVEN -- The city got a bit of good news Wednesday as it headed for the bond market, as Moody's Investors Service affirmed West Haven's Baa1 bond rating while raising its financial outlook from Baa1 negative to Baa1 stable.

Moody's, one of several Wall Street firms that rate creditworthiness, said that although the city's financial position remains weak despite a reduction in the general fund deficit in fiscal 2013 and a projected surplus in fiscal 2014, it is encouraged by steps being taken by the new administration to restore fiscal discipline. The Baa1 stable rating is rated as medium grade, with some speculative elements and moderate credit risk. The rating is listed as number eight in Moody's credit ranking system.

"We believe that the city's finances will show slight improvement over the next several years," Moody's said.

Moody's affirmed West Haven's Baa1 general obligation bond rating, affecting $114.1 million in outstanding general obligation debt.

Concurrently, "Moody's assigned a Baa1 rating to the $48.6 million General Obligation Bonds, Issue of 2014, consisting of $38.5 million Federally Taxable Series A and $10 million Series B. The outlook is stable. The bonds are secured by an unlimited tax pledge," the agency wrote in a web posting.

The Series A bond proceeds "will be used to refund the 2002 Pension Obligation Bonds (POBs) and the 2002 taxable bond series currently outstanding for an estimated net present value savings of $1.7 million, equal to 4.8 percent of refunded principal, with no extension of maturities,"Moody's wrote. "The savings will be taken in fiscal 2015 and 2016.

"The Series B bond proceeds will finance a police radio upgrade as well as various municipal capital improvements."

The stable outlook reflects two straight years of surplus operations, which have reduced West Haven's general fund deficit by 27 percent, along with "the expectation that the city will continue to make modest improvements in the deficit fund balances over the medium term," Moody's said.

Moody's also noted the city's ongoing fiscal challenges, including the negative position of the general fund, which has carried a deficit balance since fiscal 2005, and an increasing internal service fund deficit, which consists of medical, general liability and workers' compensation claims that accounted for $9 million in fiscal 2013.

Other challenges include a new governmental fund for the City of West Haven Fire Department Allingtown, which reported a deficit balance of $1.6 million in fiscal 2013.

Mayor Ed O'Brien called it good news.

"I am pleased that West Haven's financial outlook has been elevated," O'Brien said. "This moderate increase shows my administration's commitment to improving our financial picture. While much work remains, I believe that we are charting a comprehensive and responsible course of action to ultimately achieve fiscal success."

Moody's said the city's sizable $3.9 billion equalized net Grand List should begin to stabilize after a five-year decline thanks to new commercial and residential projects.

The report cited "The Haven," a proposed $200 million development of 100 high-end retail shops and restaurants that developers want to build in the Water Street area, which is expected to generate $4 million in annual tax revenue, as well as prospective expansions at the University of New Haven and the Yale University West Campus.

While both universities are tax-exempt, the city receives voluntary contributions from payment-in-lieu-of-taxes, or PILOT, funds, which will continue to increase as projects are completed.


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Source: New Haven Register (CT)

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