Crabtree concerned over Saugus credit rating

SAUGUS – Town Manager Scott Crabtree said he has “concerns” about Saugus? bond rating as the town?s current financial troubles continue, but noted he?s staying “optimistic” after a recent conversation with Moody?s rating agency.?I think we have a good handle on some of the past administration?s budget issues and we?re making those corrections,” said Crabtree. “We have a plan and we?re moving forward with reductions. We?re confident that we?ll be able to come out of this.”Crabtree said he spoke with Moody?s rating agency earlier this week in what he described as an annual “surveillance call.”?Periodically they set up a surveillance call and ask about borrowing,” said Crabtree. “They take that information and bring that to their committee. They did say they will get us back a report in about a week or so based on the information.”Saugus currently has an A1 bond rating from Moody?s, which is the fifth highest rating.Moody?s spokesman David Jacobson said A1 is considered an “upper, medium-grade rating” subject to “low credit risk.”?They?ve been at this rating level for quite some time,” said Jacobson. “We do analyze everything on an ongoing basis, even though this is the last published report, we haven?t seen any reason to make that change.”However, when told about Saugus? recent financial issues, Jacobson declined to say whether or not it could affect the town?s bond rating in the future.?It?s too early to say,” said Jacobson.Moody?s ratings start at AAA and decrease to AA1, AA2, AA3, A1, A2, A3 all the way to C3, which is the lowest rating a community can receive.Saugus saw its highest bond rating in 2006 when it was given a AAA rating. However, Moody?s dropped that rating to A1 in 2007, then to A2 and then, skipping over A3, to BAA1. The town was able to bump its rating from BAA1 to A1 in 2010, which it currently sits at now.A decrease in bond rating means higher interest rates for borrowing and a smaller borrowing pool.According to Moody?s most recent profile of Saugus from February of last year, it cited the town?s “sizeable tax base” and “manageable debt profile” as strengths while listing its “weak financial position” and a “decrease in state aid” as two challenges.The profile also lists several situations that could make its rating change. Increases in the town?s general fund reserves and tax base would make it go up, while a decrease in free cash and a continued deterioration of Saugus? tax base would make its rating decrease.Crabtree said Friday that there won?t be any free cash left over.?Free cash is a necessary component of fiscal management and an indicator of fiscal health,” said Crabtree. “We have an operating deficit so there?s not going to be any free cash available. In fact we have to raise that operating deficit in the FY13 budget.”Matt Tempesta can be reached at [email protected].