Crabtree ‘optimistic’ about financial future of Saugus

SAUGUS – Town Manager Scott Crabtree said his annual call with Moody?s Investor Services was “very positive and reaffirming of the town.”?This is positive feedback from Moody?s that the town and the financial management team has taken appropriate action that has helped stabilize the town and its finances,” said Crabtree on Wednesday. “They?re looking for us to continue with the financial management practices and policies that we?ve changed, and that would contribute to being optimistic about our bond rating next year.”Moody?s reaffirmed the town?s A2 rating and negative outlook for $20.5 million in long-term general obligation debt last month, according to a press release from Moody?s. The town?s bond rating dropped from A1 to A2 last year.?The A2 underlying rating reflects the town?s narrow financial position, moderately sized tax base located outside of Boston and manageable debt burden,” said the release. “The rating also incorporates the town?s recent history of mismanagement, reflected by misclassification of general fund and enterprise fund expenditures, structurally imbalanced operations and recurring operating deficits.”The release goes on to say that the negative outlook reflects Moody?s expectation that the town will be “challenged to maintain structurally balanced operations, and rebuild its fund balance and cash position over the medium term, 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 (DOR) and restoration of balanced operations.”Crabtree said some of those new management policies include restoring structurally balanced operations, settling six outstanding union contracts, increasing the town?s stabilization account by 39 percent, reestablishing $100,000 in the Finance Committee reserve fund and refraining from using free cash in operations.Moody?s also assigned the higher Aa2 enhanced rating for the town?s $14.7 million in general obligation bonds under the State Qualified Bond Act program, which allows the town to borrow using the state?s higher bond rating.Crabtree said this helped save the town “a ton of money.”?That?s obviously very positive that we were accepted and approved to use the state?s bond rating,” said Crabtree. “The interest rate on those bonds is the lowest out of any borrowing in the town of Saugus at this point.”Raymond James & Associates, Inc. was the winning bidder on the $14.7 million in bonds with an average interest rate of 3.822 percent. The Town received a total of seven bids on the Bonds, according to Crabtree.Crabtree also noted that it generally takes around two years for a town?s bond rating to go back up.?We?re able to use the state?s bond rating while we make the necessary financial management changes in policies and procedures moving forward so we can have an opportunity to upgrade our bond rating,” said Crabtree. “Generally, ratings are quicker to come down than they are to come back up. They want to see a trend over a period time that we?re adhering to those policies.”Crabtree said he?s “optimistic” about the town?s financial future and is “very proud of the management team.”The Moody?s press release states that “maintenance of structural balance,” a “conservative budgeting approach” and “sustained progress toward augmenting reserves and cash position” could make the rating go up.Matt Tempesta can be reached at [email protected].