Why I filed order to create committee to improve Holyoke’s financial rating, adopt fiscal policies (Guest viewpoint)
By Rebecca Lisi- City Councilor at-Large
Published on MassLive.com, August 19, 2019
At our Aug. 6 City Council meeting, I filed an order to create an ad hoc committee to aggressively seek to improve the City’s bond rating. The committee will be composed of the Mayor, several City Council members, members of the financial team within City Hall (Treasurer, Auditor, Tax Collector and Assessor) and our city’s bond counsel, Cinder McNeery. The objective is to review the City’s economic growth, fiscal policies, and financial planning tools and create a policy package that would support a case for the City to receive a bond rating greater than the present AA.
The two-new-middle-schools issue and how the City will be able to fund these desperately needed infrastructure improvements have put a greater than usual focus on our city’s finances within Council Chambers. What’s become clear through these discussions is that the City has made a number of financial decisions that lenders and investors look favorably upon and that in turn have helped bolster our financial position and access to credit.
For example, through a Finance Committee discussion about Pension Obligation Bonds (April 24 meeting, filed by Councilor Sullivan) we learned that the City is one of the highest retirement investment earners in the State of Massachusetts. At another Finance Committee meeting (November 28) we learned that the rating agencies consider it very positive that we finally abandoned the Jourdain-era subsidization of the sewer rate with general fund dollars (because the subsidy created a structural deficit for our operating budget). Finally, the City has maintained a healthy Stabilization or “Rainy Day” Fund even while using it for occasional one-time transfers.
I argue that the City is in a position to make a compelling case for why it deserves a better bond rating. The rating agencies do not have the full picture of the economic development that we have accomplished in recent years due to the deficit left from the loss of the Mt. Tom Power Plant — the City’s largest taxpayer. On an accounting sheet, the City has not been able to achieve a rate of new growth greater than 2.5% because the economy in the region has not been growing at that rate and any growth that we do experience is set against the backdrop of the loss of the coal plant revenues. Additionally, the Mayor and the City’s financial departments have adopted several fiscal management tools, including a capital improvements plan, that have not yet been fully taken into account for our present rating.
While there has been a lot of talk in Council Chambers about requests for enhanced fiscal policies, the City Council has not really called for adopting anything beyond a capital improvements plan, and few of my colleagues have filed anything in attempt to learn about what finance policy options are available to the City or seek guidance from experts in the field about how different policies might work for Holyoke. Through this committee, I hope that the City Council can finally propose a package of policy instruments that will help the City’s financial position become even more resilient.
The City has much to benefit from moving to a AA+ bond rating. First, we would be able to go to bond for any number of capital improvement projects with a lower interest rate. If we think about the schools project alone, current cost projections have been forecasted between 4 and 5% interest over the next 20 to 30 years. If we were able to bond at even a half of percent less (3.5%) we could be able to save up to approximately $16 million interest payments over the life of the loan which would be about a half million dollars in savings a year.
Second, even if we don’t achieve the AA+ rating that we are after, the city benefits from the work and effort put into finally crafting a fiscal policy that would be able to serve Holyoke for another decade. Finally, at a time when our city is experiencing such deep divisions, I believe that the pursuit of a higher bond rating is an activity that can get the City Council onto the same page and bring together individuals who hold sometimes clashing perspectives and ideologies.
Proactively seeking a better bond rating is a pursuit akin to “shooting for the moon and landing among the stars” — there is nothing to lose — and so much to gain — from this endeavor.