Amherst earns another AA+ bond rating from S&P

Amherst Town Hall.

Amherst Town Hall. STAFF FILE PHOTO

By SCOTT MERZBACH

Staff Writer

Published: 06-20-2024 9:33 AM

AMHERST — Amherst is maintaining a AA+ stable bond rating from analysts at Standard & Poors Global Rating Services, ensuring that relatively low interest rates will remain in effect as the town takes on borrowing costs for various projects.

Town Manager Paul Bockelman recently informed the Town Council of the AA+ stable bond rating, “which is really good for us.”

“I really compliment our finance team who are excellent at making the presentation to bond analysts,” Bockelman said.

That team includes Comptroller Holly Drake, Treasurer/ Collector Jennifer LaFountain and former finance director Sandy Pooler, who has returned as a paid consultant.

Amherst has had the AA+ stable bond rating since 2014, when it was upgraded to one step below the highest rating.

The report mentions the town’s seasoned management team, operating surpluses and high reserves, with the town maintaining reserves above 25% of general fund expenditures over the past three fiscal years, and its commitment to Other Post Employment Benefits and pension responsibilities.

But Bockelman said Amherst continues to be hobbled by its demographics, as income is relatively low, and bond rating analysts like to see wealth to get the higher bond rating and lower interest rates. “We struggle against that as compared to some of our neighboring communities,” Bockelman said.

It would be challenging to get to AAA without a change in those demographics, he said, when half the town’s 40,953 residents are college students.

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“Amherst has a large student population, accounting for about 50% of the total town’s population. In addition, approximately 30% of the town’s total valuation is exempt from taxation, per the state’s Department of Revenue.,” writes S&P’s Primary Credit Analyst Rahul Chakraborty in the seven-page report. “Consequently, the town’s underlying wealth and income metrics significantly lag similarly rated peers nationally and most rated governments within the state.”

The report, though, notes Amherst’s location.

“However, we believe the presence of the University of Massachusetts Amherst, Amherst College and Hampshire College, collectively part of the Knowledge Corridor, provide a stabilizing presence, do not reflect the true economic vitality of the town, and support the current rating level.”

The report also points to how Amherst is stimulating economic development, including high-density housing developments close to the UMass campus, as well as the ongoing work in the downtown core for commercial revitalization, specifically the North Common renovation.

Amherst currently has a low-debt profile, according to the report, about $42.2 million in debt outstanding, with additional debt plans, such as issuing $23 million in fiscal 2025 for the new elementary school to be constructed on South East Street and another $21.5 million in fiscal 2025, through the Massachusetts Clean Water Trust, to rebuild a water treatment facility in Pelham, of which $7 million will be covered through a loan forgiveness program and user charges.

The report also references more debt to support a new Department of Public Works headquarters that is several years from happening.

“While we view Amherst’s debt burden as low, additional debt issuances could negatively affect our view of the town’s debt profile,” the report cautions.

Scott Merzbach can be reached at smerzbach@gazettenet.com.