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As some of you may have read in media reports, Moody's Investors Service, one of the nation's leading credit rating agencies, on July 28, 2011 placed 162 Aaa-rated communities across the country on a list for review because of the Federal debt ceiling crisis. They chose not to place nearly 400 other Aaa-rated local government credits on such a list. Since issuing that statement on July 28 regarding the planned review, Moody's announced that it would not downgrade the U.S. government bond rating after President Obama signed the Budget Control Act of 2011.
On August 8, Moody's notified the Town of the action they were taking; that is, to advise that they were moving all Aaa Massachusetts credits to a negative outlook. The communities are the same that were placed on a “watch” status last week. “In the event the U.S. government's Aaa rating is downgraded, Moody's will determine the outcome of each review by evaluating the strength of the sovereign linkages to each affected credit, including direct and indirect reliance on federal spending, sensitivity to deteriorating macroeconomic conditions and vulnerability to disruptions in the financial markets. Moody's will also consider positive credit attributes of each issuer such as financial position, operating flexibility and management responsiveness."
However, it is important to note that the Moody's review occurred prior to the November 17 Special Town Meeting vote to use an additional $4M in free cash to finance the FY2012 annual operating budget. The Town's credit rating will be reviewed again in January 2012 in conjunction with the annual debt issue.
Fred Turkington
Town Administrator
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