New London gets good news with improved S&P bond rating

New London — The credit rating agency Standard & Poor’s has upgraded the city’s bond rating — a sign of fiscal stability after a rocky few months of uncertainty surrounding the delayed passage of a state budget.  

S&P Global Rating removed the city from a “CreditWatch with negative implications,” and affirmed an “A+” general obligation bond rating for the city with a stable outlook.

"The stable outlook reflects our opinion that New London's budgetary flexibility and performance will continue to improve, particularly given that revenues have been fundamentally stable and no immediate effect is expected from pressures in the state budget," S&P credit analyst Christian Richards wrote in a Dec. 12 statement.

New London was among nine municipalities placed on credit watch by S&P on Sept. 28, a warning that a bond rating is in danger of going down and borrowing interest rates up. The others were Derby, Bridgeport, Stratford, Hamden, New Haven, Plymouth, Waterbury and West Haven.

Finance Director Don Gray said the warning was the result of uncertainties surrounding a long-delayed state budget and its projected cuts in aid to struggling municipalities such as New London.

“They’re basically informing investors around the country of the fiscal concerns that were happening in Connecticut,” Gray said of S&P’s rating.

The city administration and City Council throughout budget deliberations this year were forced to curtail spending to avoid a massive spike in the city’s tax rate. Several city employees were laid off as a result and the school district has eliminated some unfilled positions.

“We were prepared in anticipation of the problems at the state level and reacted accordingly in our budgeting for fiscal year 2018,” Gray said. “As it turns out it was a good thing we did. When the state finally adopted its budget, we did not have to make any major changes to our budget. A number of other communities had to make further draconian cuts.”

The analysis by S&P notes that the state budget provides New London with $90,000 less in aid in the current budget compared to last year's budget. S&P used data provided by the state Office of Policy and Management. The city estimates there will be closer to a $200,000 drop in state aid because of a cut to a state renters rebate program.

S&P appears satisfied the city will be able to recover.

“The stable outlook also reflects our opinion of management's willingness and ability to adjust revenues and expenditures to restore and maintain structural balance. We do not expect to change the rating in our two-year outlook horizon,” Richards wrote in his statement.

Gray called the S&P rating a “a tremendous achievement at this point in time with what’s been going on in Connecticut.”

“What this is doing is informing the investment community that New London’s finances continue to improve. The city made some very appropriate decisions during the budgetery process for this past year,” he said.

Gray said he anticipates better than expected results from an ongoing audit for the fiscal year 2017.

“We were able to control expenditures and our revenues, we received at least what we had anticipated or more,” Gray said.

g.smith@theday.com

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