PORTSMOUTH TOWN COUNCIL NOTES

Portsmouth maintains Aa2 credit rating from Moody’s

Rating an important factor impacting interest costs when the town borrows money

By Jim McGaw
Posted 1/18/23

PORTSMOUTH — After being informed it may expect a downgrade, the Town of Portsmouth learned last week that Moody’s Investors Service has maintained the municipality’s Aa2 bond …

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PORTSMOUTH TOWN COUNCIL NOTES

Portsmouth maintains Aa2 credit rating from Moody’s

Rating an important factor impacting interest costs when the town borrows money

Posted

PORTSMOUTH — After being informed it may expect a downgrade, the Town of Portsmouth learned last week that Moody’s Investors Service has maintained the municipality’s Aa2 bond rating.

The rating reflects the town’s ability to repay debt and debt-like obligations without consideration of any pledge, security, or structural features. It measures a city or town’s fiscal management practices and ability to lead through periods of budget challenges. The bond rating is often the single most important factor impacting the interest cost on bonds, which benefits taxpayers when a municipality borrows money.

The Aa2 bond rating is the third-highest one can achieve, behind ratings of AA+ and Aa1. Only a handful of municipalities in Rhode Island have higher ratings.

Currently, the town has approximately $19.4 million of debt outstanding, according to Moody’s.

On Jan. 9, Town Administrator Richard Rainer, Jr. informed the Town Council that more than 300 municipalities and counties evaluated by Moody’s were facing potential changes to their issuer ratings, including Portsmouth. The agency’s new methodology included more emphasis on the climate change issue, Rainer explained.

But when Moody’s released its official bond rating for Portsmouth a few days later, the town had maintained its Aa2 issuer rating.

“We were evaluated for a potential downgrade due to their revised rating methodology but … we successfully impressed upon the agency the strength of Portsmouth in all key areas,” Rainer stated in an e-mail.

“The Aa2 issuer rating reflects a strong economy with high resident income that is primarily residential in nature although the town does benefit from a maritime economy in and around its borders,” Moody’s stated in its report. “The rating also incorporates a stable financial position that is heavily reliant on dependable property tax revenue that helps to mitigate low reserves and liquidity. Additionally, the town has modest leverage and below-average fixed costs ratio.”

The report continued: “Portsmouth’s economic strength is based on the residential tax base with a high resident income equal to 150.7 percent of the U.S. median household income adjusted for regional price parity. The town’s maritime economy includes both the private sector, led by the largest taxpayer and employer, Raytheon Technologies Corporation … as well as the notable regional governmental presence of the U.S. Navy.

“The town’s financial position is very stable due to conservative fiscal management and reliance on property taxes that help mitigate low reserves and liquidity. Governmental funds generate 97 percent of revenue with property taxes representing 78 percent of fiscal 2021 audited governmental funds. The town ended fiscal 2021 (June 30, 2021) with available fund balance and net current assets of $9.4 million, representing 12.2 percent of revenue and a net unrestricted cash equal to 16.5 percent.”

Moody’s cautioned the town that factors that could lead to a downgrade of its rating would include a “decline in reserves and liquidity, material increase in leverage, and (a) significant increase in the fixed costs ratio.”

Resignations/appointments

In other business on Jan. 9, the council accepted with regret the resignations of Ann Vickers from the Bristol Ferry Town Center Committee and Raymond Abraham from the Melville Park Committee.

The council appointed Richard Alexander to the Melville Park Committee, and Sharlene Patton to the Parks & Recreation Committee. Re-appointed were Kathleen Wilson to the Planning Board, Leslie Costa to the Design Review Board and to the Tree Commission, and Patricia Rossi to the Harbor Commission.

James Wesner and William White were removed from the Melville Park Committee as their terms expired years ago and they hadn’t been attending recent meetings. Brendan Deprest, who hadn’t been attending meetings, and Rick Taylor, who’s moved away, were removed from the Tree Commission. 

Future meetings

The council will next meet on Monday, Jan. 23, in what should prove to be a lengthy session. That’s when the council hosts its annual joint session with the School Committee to focus on legislative priorities, in addition to dealing with what’s anticipated to be a full agenda.

Council members talked about starting the meeting at 6 p.m., rather than the usual 7 p.m., but no decision had been made as of press time.

The council will also have an ethics training session on Monday, Jan. 30, before another regular meeting on Monday, Feb. 13. Both meetings begin at 7 p.m.

2023 by East Bay Media Group

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Meet our staff
Jim McGaw

A lifelong Portsmouth resident, Jim graduated from Portsmouth High School in 1982 and earned a journalism degree from the University of Rhode Island in 1986. He's worked two different stints at East Bay Newspapers, for a total of 18 years with the company so far. When not running all over town bringing you the news from Portsmouth, Jim listens to lots and lots and lots of music, watches obscure silent films from the '20s and usually has three books going at once. He also loves to cook crazy New Orleans dishes for his wife of 25 years, Michelle, and their two sons, Jake and Max.