Town secures historically low interest rates for bonding projects
Published 5:05 pm, Tuesday, July 13, 2010
Following three triple-A credit scores from rating agencies this past week, Fairfield locked in historically low interest rates for new bonding projects.
During two 15-minute electronic bidding contests Tuesday morning, the town secured a 3.22 percent interest rate for $25 million in long-term bonding, and a 0.33 percent rate for $18.1 million in one-year notes.
"I'm ecstatic with the results of the sale," said Paul Hiller, the town's chief fiscal officer.
The bond awards capped what Hiller described as a highly competitive bidding process.
In the auction for long-term bonds, Fidelity Investments edged out Janney Montgomery Scott, LLC, by one-hundredth of a percentage point. Seven other firms made bids.
A short while later, JP Morgan and Citigroup placed identical bids for the town's one-year notes. Citigroup's bid came 99 seconds after JP Morgan's, however, giving the bond award to JP Morgan.
Hiller attributed the competitiveness of the bond auctions to good market conditions and the top triple-A ratings recently given the town's credit status.
While Standard & Poor's and Fitch Ratings issued generally favorable reports, Moody's Investor Service offered the sole blemish, noting a "negative outlook" for the town's current $222.5 million in long-term debt. The Moody's report cited the town's low cash reserves -- or contingency funds -- as the cause for the warning.
Over the past three years, the report stated, the town has averaged $11.6 million in its General Fund balance, representing about 4.7 percent of the overall budget. Town policy requires that fund be between 6 and 9 percent, the report stated.
First Selectman Kenneth Flatto said the town plans to build the General Fund back into that range over the next few years, but said the warning should cause no concern. He added that the rating agencies are under pressure to more closely scrutinize business and municipal finances in the wake of the recent global financial crisis.
"So two out of three rating agencies, in this climate, having no negative comments for the town is pretty good," Flatto said.
The $25 million in long-term binds will mostly finance construction projects at Stratfield Elementary and Fairfield Woods Middle schools and the new Metro Center railroad station.
According to Flatto, about half of the $18.1 million in short-term bonds will be tucked into the long-term bonding for next fiscal year. Doing so, he said, enables the town to capitalize on the current extremely low short-term interest rates.
Meanwhile, the town's bonding committee Tuesday morning shifted $350,000 in the long-term bonding schedule away from the recently approved girls softball field on Hoyden's Hill.
The softball field project was approved for bonding two weeks ago by the Representative Town Meeting. However, several RTM members, Hoyden's Hill residents and other activists have organized a petition drive trying to bring the project before a townwide referendum. The deadline for filing the petitions was Tuesday afternoon, but the number required to qualify for a referendum -- 1,766 voter signatures -- had not been certified by press time.
As the project hung in the balance on Tuesday morning, however, the bonding committee temporarily pulled the funds, according to Flatto. He said that this would not affect timetables for construction of the field if the project goes forward.