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    Thursday, April 18, 2024

    New London’s bond rating upgraded again

    New London ― For the second time in as many years, a leading provider of credit ratings has upgraded New London’s bond rating to reflect the city’s “improved financial resilience.”

    Fitch Ratings on Wednesday announced it assigned a “AA” rating to $130 million in general obligation bonds set to be issued by the city on Tuesday.

    The city’s bond rating was enhanced from A+ in 2022 to AA- by both the Standard & Poor and Fitch credit rating agencies.

    In making the upward adjustment, Fitch highlighted the growth of the city’s general fund balance, or “rainy day” fund, to more than $20 million over several years.

    Finance Director David McBride said that amount is considerably more than the city had in reserves roughly a decade ago.

    “About eight to 10 years ago, that reserve amount was just over $200,000,” he said. “To address that, the City Council in 2017 directed a 1% annual increase to the general fund. And we now have $20.9 million in there.”

    McBride said the new bond rating designation has practical benefits to the city.

    “First, it sets the tone for investors,” he said. “It shows they’d be coming into an environment with strong financials and no huge issues.”

    The improved rating, the third highest the company grants, also will translate to lower interest rates when the city borrows money.

    McBride said the Standard & Poor credit rating agency did not adjust its previous AA- bond rating for New London this year.

    In its rating report, Fitch noted the city’s budgetary controls and policies had improved in recent years, as well as a “sizable” jump in taxable property values after a recent revaluation.

    The company noted the significant financial pressure New London faced during the “Great Recession” of the mid-2000s was stabilized through a combination of subsequent spending cuts and tax rate increases.

    Fitch stated its positive view on New London’s budget management performance was “somewhat tempered” by the city’s practice of making “pay-as-you-go” contributions to its non-contributory employee pension plan — now closed to new hires — though plan liabilities were characterized as modest.

    Mayor Michael Passero on Friday called the rating upgrade a testament to the city’s work in funding its pension obligations, creating a robust general fund and submitting timely audit data.

    “It’s a nice validation on how far we’ve come,” he said. “And our goal is to get to that highest AAA rating.”

    j.penney@theday.com

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