NORTHAMPTON — Mayor David J. Narkewicz announced Tuesday the city’s bond rating has been upgraded to AAA, the highest possible ranking, which will allow the city to “stretch tax dollars further.”
The city, which was upgraded from AA+ to AAA/Stable by Standard and Poor’s Global Ratings, is one of only 65 communities in Massachusetts to attain the AAA-level bond rating, according to a statement released by the mayor. There are 351 towns and cities in the state.
“I am extremely proud to announce this significant financial milestone for the City of Northampton,” Narkewicz said in a statement. “S&P’s rating upgrade is an affirmation of my administration’s determined and disciplined work to stabilize our city budget, rebuild our financial reserves, and strengthen our fiscal practices and policies. It also reflects our overall economic strength as a city.”
The higher rating will allow the city to borrow money at “favorable interest rates on upcoming and future borrowings for critical capital investments,” the mayor said in the statement. He said the rating will allow the city to “continue providing quality city and school services” to the community.
The upgrade comes at a time when the city is preparing to borrow $4,825,000 for wastewater treatment plant upgrades, street resurfacing, LED street light conversion, a new fire engine, updated equipment for emergency dispatch, the replacement of city communication systems and the renovation of Pulaski Park, according to the statement.
The new rating will allow the city to dedicate more money to actual projects and less to interest rates. Narkewicz said the lower interest rates could result in another paved street, for example.
“This will allow us to make peoples’ tax dollars go further,” Narkewicz said in an interview. “This frees up money for services and schools.”
The rating applies to general obligation bonds and was decided through an evaluation process including factors such as the local economy, the city’s financial management and budgetary performance which were judged to be “strong” or “very strong” factors in the upgrade.
Standard and Poor’s Rating Services was renamed S&P Global Ratings on April 28, according to its website.
The city’s budget is “strong” and “stable” according to the S&P report. Increase in revenue from motor vehicle excise tax, hotel room occupancy tax, meals tax, building permit issuance and “overall conservative budgeting” contributed to the “positive revenue performance,” according to the report.
“The city’s $3.2 million operating surplus in fiscal 2015 reflects approximately $1.1 million of revenues in excess of budget, and $1.7 million of unexpended appropriations,” the report stated.
The report said the city has “very strong budgetary flexibility.” The city’s available funds increased to $14.8 million in fiscal year 2015, up 21.6 percent from $11.6 million in fiscal year 2014. The report pointed to a $2.5 million override of the city’s levy limit in 2014 and a $2.5 million tax levy increase in the 2016 budget as “positive credit factors” because they indicate the city is willing to raise taxes when needed.
Other “strong assets” included the “diversity and growth in the local tax base combined with the city’s progress in building reserves,” the statement said.
The report also included information about the city’s post-employment benefit funding. The “other postemployment benefits contributions” accounted for 8.4 percent of government fund expenditures in 2016. The city made its “full and required” pension contribution in 2016, but the pension plan is funded at 63 percent.
The report found the city added $125,000 in 2016 to a trust it established with $100,000 in 2015 for “other postemployment benefits.” The city budged $165,000 to add to the fund in fiscal year 2017, keeping with its goal to increase contributions to the trust by $25,000 to $50,000 annually.
The mayor said the city meets annually with ratings agencies. He sees the S&P decision to upgrade the rating as a “strong endorsement” of his administration’s multi-year plan to rebuild resources and spend money efficiently.
Ratings reports are available on the city’s website at www.northamptonma.gov.