Moody’s issues negative outlook on Saugus debt

SAUGUS – Moody’s Investor Services has given a negative outlook to Saugus’ $20.5 million in long-term general obligation debt, and reaffirmed the town’s A2 rating, which was dropped from A1 last year.The negative outlook is based on the “expectation” that Saugus will be “challenged” to maintain structurally balanced operations, and rebuild its fund balance and cash position over the medium term, according to a press release from Moody’s. This is despite “the implementation of new fiscal controls by a new financial management team, compliance with the recovery plan established by the state Department of Revenue and restoration of balanced operations.”According to Moody’s, the A2 rating also reflects the town’s “narrow financial position” and “manageable debt burden,” and incorporates the town’s recent “history of mismanagement, reflected by mis-classification of general fund and enterprise fund expenditures, structurally imbalanced operations and recurring operating deficits.””The current level of reserves provide management limited financial flexibility to offset budget variations and growth over the next several years,” said the release.The release also lists Saugus’ strengths, which includes a “restoration of structurally balanced operations following reclassification of expenditures,” and some challenges, which include “historical mis-classification of general fund and enterprise expenditures” that resulted in state oversight and recurring deficits in recent years, “which weakened the town’s financial flexibility.”While it gave a negative outlook for some of Saugus’ bonds, Moody’s assigned an Aa2 enhanced rating with a stable outlook for $14.7 million in general obligation bonds under the State Qualified Municipal Bond Act, which allows Saugus to borrow under the state’s higher Aa2 bond rating. These bonds financed town-wide capital improvements, said the release, including technology and vehicle upgrades, remodeling of town infrastructure, water and sewer improvements, and school renovations.Town Manager Scott Crabtree could not be reached Tuesday.Moody’s said maintaining a structural balance and a conservative budget approach could remove the negative outlook.Matt Tempesta can be reached at [email protected].