The Town of Brookfield retained its bond score after being visited by two rating agencies last week. Moody's affirmed the town's credit rating of Aa1 and Standard & Poor's (S&P) gave the town a rating of AA; both are just below the maximum rating of Aaa, according to Town Controller Jay Wahlberg.
This is the first time the town has received a rating from S&P and in Moody's reaffirmation of the Aa1 rating, they noted that it was stable, which means the town is not in danger of being downgraded. A better bond rating translates to lower interest rates on long-term borrowing.
According to Moody's report, "The rating and stable outlook reflect the town's stable tax base, above average wealth levels, satisfactory financial operations and low debt burden."
"We have made recent changes to better align ourselves with a triple-A rating, but they weren't seasoned enough," Wahlberg explained, including instituting a minimum fund balance of 9 percent of the annual budget and plans to maintain the debt service below the current level, but the agencies are waiting to see how these measures pan out. Though the town's finances are healthy, "we closed out some balance sheet accounts," , "and they took that as being very favorable," Wahlberg said, "but they want to see how that plays out in the years to come."
"We have most of the ingredients" for an Aaa rating, First Selectman Bill Davidson said, "We're maintaining a conservative balance sheet and a healthy fund balance," though there are still areas for improvement.
Both S&P and Moody's were concerned with the level of funding for the town's pension plan. "Although it is funded, it need to be funded more," according to Wahlberg. Right now there is about $400,000 in the account, "and they'd be more comfortable if it was around $500,000."
"As of the town's most recent actuarial valuation (July 1, 2008) Brookfield's pension plan remained relatively well funded (90 percent)," Moody's reported, "however future actuarial reports are expected to reflect a decline due largely to market losses and public safety cost-of-living increases. The town maintained a funded ratio in excess of 100 percent until 2006, but since then has consistently funded less than its annual required contribution (ARC), averaging between 44 percent and 34 percent since 2006."
Moody's was pleased that the town has created a Retirement Benefits Advisory Committee, but noted that "looking ahead, the funding status of the town's pension plan will be an important consideration in future rating reviews."
Pension plans are never fully funded, Wahlberg explained, however the current allocation raised flags. "You never totally fund that," as not all town employees will retire at once, "but you do have to make sure you can cover your costs" in a given year. "We pay as we go now and we will continue to pay as we go" for now, as the town did not budget any additional funds for the pension plan this year, he said, but in the future "let's fund it so we don't."
Overall, the rating agencies "don't want to see us mortgage our future," Davidson said, "and we're not."
The town's outstanding debt is "pretty much in line" with what the agencies were looking for as a ratio of annual debt service to the total budget, according to Wahlberg.
Wahlberg was "hoping for higher, but that's okay — you always have to think higher. We're almost at the top of the ladder," he said, "one more rung to go."
The town also received an evaluation from Fitch, though they declined a full rating, as it would have cost $8,000, rather than $4,000 for the simple evaluation. Fitch representatives gave the town a favorable assessment, but did not give an official rating. "It doesn't hold as much weight," Wahlberg explained, "nor will it be in our report."