Haverhill Mayor James J. Fiorentini. (WHAV News file photograph.)
Haverhill is keeping the financial industry’s second-best credit rating—a metric used to determine how much interest the city pays in interest—at least on its current loan which includes an $8 million piece of the upcoming Dr. Albert B. Consentino School replacement.
Standard and Poor’s gave its “AA” rating to the city’s current $10.9 million borrowing package, which is financed by selling bonds to investors. The current loan is due to be paid off in 20 years. If the city maintains the rating when it comes time to borrow remaining construction amounts, officials estimate, it would save 3% in interest costs over the life of the loan, or approximately $2.6 million over 25 years.
“I was proud to see that two of the reasons for our strong bond rating was strong management and maintain strong reserves,” Mayor James J. Fiorentini said. “Over the years, we have held a tight rein on spending and increased our reserves to the adequate number we have today. Our policies of strict fiscal discipline and strong management have saved us millions of dollars in interest payments over the years and made new projects like the Consentino School and the Hunking School possible. Had our bond rating remained where it was when I took office, we would not be talking today about a new Consentino School.”
Fiorentini said the city’s bond rating has steadily improved from “Baa3” when he became mayor in 2004. At that time, Haverhill and Springfield were tied for the lowest municipal bond rating in Massachusetts.
Explaining its rationale to prospective investors buying city bonds, S&P noted, “The stable outlook reflects S&P Global Ratings’ view of Haverhill’s strong economy, formal financial planning and policies and history of balanced operations,” the new S&P report said. It added, “We understand there is a large $160 million development underway in the downtown area, coupled with several citywide residential units under construction due to very strong housing demand. The city is also creating a new industrial park to accommodate new businesses looking to expand or relocate into Haverhill.” The latter is an apparent refence to plans to redevelop the former Dutton’s Airport.
S&P said ratings of future debt issuances could go up or down. It notes, for example, “Haverhill’s large pension and other postemployment benefit obligations remain a credit weakness due to their size and funded ratios, coupled without a sufficient plan to address liabilities during the next few fiscal years.” City officials noted the city is on track to fully pay its employee pensions within about 10 years. S&P, however, calls attention to workers’ post-retirement health care plan that carries a liability of about $338.9 million.
On the plus side, the credit rating agency notes, “We could raise the rating if the city were to reduce its unfunded retirement liabilities and improve reserves and economic indicators to levels we consider commensurate with higher-rated peers.”