Amherst bond rating stable, gets low-interest rates on borrowing
AMHERST — By maintaining the current bond rating, Amherst has secured a low interest rate for $6.88 million in projects that include municipal sewer extensions and a townwide tree planting plan.
Town Manager John Musante told the Select Board Monday that the 1.8 percent interest rate the town got in its bond sale was, by a substantial margin, the lowest he has seen in his two-decade municipal career.
Taxpayers who supported the borrowing at the 2012 annual and the 2011 fall Town Meetings will see reduced long-term costs to the town as a result of the low interest rate.
“That just allows our capital projects to go that much further,” Musante said.
The interest rate for bonds that Amherst sold last year was 2.16 percent.
Claire McGinnis, treasurer and collector for the town, said the bond sale demonstrates that borrowing costs are minimal.
“Money is very affordable right now,” McGinnis said.
Included in the borrowing is $4.2 million for sewer extensions on Harkness Road and Amherst Woods, $1 million for townwide road improvements, a portion of the $600,000 tree planting plan, purchase of a Department of Public Works dump truck and repairs to the central fire station.
The bond sale also led to direct savings to taxpayers, as a bond for the Crocker Farm School project, first sold in 2003, was refunded. This originally had a 4 percent interest rate, which under refunding was reduced to .83 percent, saving $66,000 over the remaining life of the bond.
Musante, McGinnis and Finance Director Sanford “Sandy” Pooler all pointed to Standard & Poors, the credit rating agency, for reaffirming the AA stable long-term bond rating.
As in previous years, Standard & Poors cited the town’s strong and stable economic base that includes University of Massachusetts, Amherst College and Hampshire College, good income and wealth indicators despite a large student population and good financial management. Their primary credit analysts, Apple Lo, wrote:
“The town’s financial position is good, in our view, and financial reserves have been consistent despite the slow national economy.”
Lo’s report does draw caution to the large unfunded Other Post Employment Benefits, or OPEB, which is described as a $94 million accrued liability.
Lo writes that if it works toward dealing with this liability, Amherst could improve its bond rating, which would mean even lower interest rates.
“A consideration of a positive rating action over time would require further actions to mitigate the effects of Amherst’s long-term liabilities in addition to the town continuing to maintain balanced operations and strong reserves.”
The town has taken some measures, including establishing an OPEB trust and placing $585,000 in it last year.
“It’s reassuring to me as town manager to receive an independent review like that of the town’s financial condition,” Musante said.