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New London — As the city prepares to sell municipal bonds next month, Mayor Daryl Justin Finizio, Finance Director Jeff Smith and the city's financial advisers met Thursday with two bond rating agencies for a review of the city's rating.
In conference calls with analysts from Standard & Poor's and Fitch Ratings, city officials described the city's current cash flow problems and the plan they've proposed to get its financial house in order.
"My sense of it was that they were pleased that we were addressing our liquidity problems," Smith said. "They're happy to see us put a plan in place and take action."
In November, when both S&P and Fitch last released rating summaries for New London, Fitch upgraded the city's financial outlook from negative to stable but also warned that a fund balance replacement would be a key to preserving the rating.
"The city's ability to maintain stable to positive operations and to restore reserves to adequate levels over the medium term is fundamental to maintaining the current rating," the agency wrote in its summary.
A municipality's rating has a direct effect on the interest rates paid on long-term borrowing. The rating is an assessment of the likelihood that a city or town's debt will be paid off.
The overall plan to address the city's cash flow troubles and replenish the fund balance has four parts.
The first step was the bonding of $4.4 million - which the City Council authorized earlier this month - to account for state grant funding the city has never collected, and to pay for vehicle purchases made last year that were originally going to be paid from the general fund.
On Monday, the council passed resolutions that require it to budget at least $250,000 in each upcoming fiscal year for fund balance replacement and mandates that proceeds from the sale of city-owned real estate must go into the fund balance.
The next step would be to bond $1.1 million to replace money the city took from the fund balance when projects ran over budget.
By a 4-3 vote Wednesday, the council passed the second reading of an ordinance authorizing that bonding.
Councilors Michael Passero, Martin T. Olsen and Michael J. Tranchida voted in opposition. The ordinance passed its first reading by the same vote on Monday and will require a third and final vote.
Passero has said he does not buy the theory that more bonding is required to maintain the city's rating.
Smith said he expects S&P and Fitch to inform the city of its ratings sometime next week.