By Katina Caraganis
ASHBY -- As town officials ponder ways to pay for several pricey projects, including a new high school, town well, septic systems at the middle school and Town Hall, and possibly a new police station, the idea of how to fund them inevitably comes up.
One way the town will not fund its projects is through a municipal bond because the town does not have a bond rating to secure funding.
Ola Fadahunsi, a spokesman with Standard and Poor's, an agency that issues bond ratings based on municipalities' financial situation, said Friday the town does not have a bond rating on file with the agency.
The agency issues grades from a AAA plus to a D based on its finances, but the municipality must request a bond rating.
Selectman Steve Ingerson said it is his understanding a municipality needs to have a clean audit report conducted for five straight years before it can consider requesting a bond rating, and the town has not been able to do that.
An audit is conducted annually by an agency that looks at how a municipality manages its finances. It lays out where a municipality is managing finances well and where it can improve.
The first goal of the town, he said, should be to secure positive audit reports over a number of consecutive years to secure its financial future.
"I haven't figured out where I want to stand on that. I'm not sure we want to allow the people who are controlling the town the ability to have a credit card. Right now I don't feel as though I do," Ingerson said.
A proper capital plan needs to be established as well, he said, so future boards and committees know exactly what the needs of the town are and where money should be going.
If the town had a bond rating, it could go out and secure municipal bonds to fund major capital projects, including its portion of a new high school or a new police station, Ingerson said.
Municipal bonds are issued to a city or town to raise funds, usually for a large capital project or for other purposes it does not immediately desire to or can afford to pay for immediately.
Repayment periods on bonds can be as short as a few months or as long as 40 years.
The method of issuing bonds and the rules and regulations that govern them vary by state.
The type of bond and amount are issued based on the full faith and credit of issuer. The probability of repayment as promised is determined by an independent reviewer, or rating agency.
The three main rating agencies for municipal bonds are Standard and Poor's, Moody's and Fitch.
Any of these three agencies can be hired by the municipality to assign a bond rating, which helps sell bonds on the market.
"It doesn't overly concern me, but the part that bothers me is that we don't run our operation clean enough to get that kind of a rating. I truly think with proper management we can do well," Ingerson said. "Because of the fact that we don't manage our money in a proper way, we can't achieve five clean years in a row of financial statements. That jeopardizes our position to get a bond rating."
Michael McCallum, a veteran member of the Board of Selectmen, said he does not believe the town is in a bad financial state and compared acquiring a bond rating to acquiring a credit card, which he believes is unnecessary.
McCallum said as far back as he can remember, the town has never had a bond rating and has never run into problems because it didn't have one.
In the case of the high-school building project, for example, he said the school district has a bond rating and would bond the total cost of the project and Ashby would reimburse the school district for its portion.
Currently, the town has about $700,000 in its stabilization fund, he said.
Because a bond rating costs money to acquire, he said, he doesn't believe it makes good financial sense to expend that money.
"A bond rating isn't like a credit rating where it happens for free. You have to pay someone to do that, and I don't see the point. It has served us well over the 20 years that I have been involved in town government to not borrow money," he said. "We've done quite well the way we have been operating and I don't see any reason to change. We borrow for a few major things."
The town's portion for the high-school building project and its portion for a new septic system at Hawthorne Brook Middle School in Townsend will likely be funded through overrides, and the lack of a bond rating would not be a problem.
"I don't know what the other towns are looking to do for their portion of the high-school project. I know last year for the budget, Townsend said no twice to an override. I wish we had enough people in town who were concerned about it instead of sitting by the wayside," he said.
Whatever the project and whatever the funding mechanism, McCallum said more people in town need to get involved to help make informed decisions.
"Let's look at it this way: Nobody really knows what the real price tag will be for the high school," he said. "We have stabilization but nobody wants to touch that because it's sort of our savings account. You need a two-thirds vote from town to go into stabilization anyway."
Janet Flinkstrom, the chairwoman of the board, said as far as she knows, the town is in fine financial shape and does not see the point in acquiring a bond rating.
The town needs to continue living within its means, she said.
"Actually, I believe they just went through an audit and as far as I can tell and from what I'm hearing and I know, we are holding our own and we are keeping our head slightly above water," she said, while noting she didn't compare this year's audit with previous years but believes the town has maintained its financial standing.
"We've been a very conservative town. Nobody wants their taxes to go up. I'm on a fixed income and there are many people who are as well. The reality of the times we live in is it's not going to get any cheaper," she said. "We have to sit down with the Finance Committee more regularly and work out a priority list of things that need to get done."
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