For Immediate Release: 10/22/2013 11:13 am
Worcester, MA (October 22, 2013) - I am very pleased to inform you that Standard and Poor's (S&P), an independent credit rating agency, has upgraded the City's municipal bond rating to AA-. As you know, S&P upgraded our bond rating last year (2012) from A- to A+, and unprecedented two-grade improvement in a single year (mirrored by Moody's Investor Service last year as well, another independent credit rating agency). For perspective, this is a three grade improvement by one agency in two, back to back years.
A strong credit rating, like AA-, is a statement that the City, and its municipal bonds, are a solid, long-term investment. It does not come easily and without tough decisions, Solid plans and actual progress. The credit rating process is extremely thorough and arduous, even more so since the global economic downturn that has persisted since FY2009. All aspects of our City government and our community are evaluated objectively with a "fine-tooth comb" through a strict set of criteria focused on: management, year-to-year financials, long-term fiscal planning, resolution to long-term liabilities (OPEB1 pension), economic development, and City-wide statistics and data.
S&P's credit report cite various reasons for the upgrade:
"Worcester's financial position has improved substantially over the past three fiscal years because of improved financial management policies, practices, and controls, as well as a demonstrated commitment throughout the city to strengthen financial reserves."
"Worcester has recently demonstrated the capacity to execute key reforms to manage near- and long-term fiscal challenges. Of note have been recent health insurance reforms that have provided substantial near-term annual savings and lowered health insurance liabilities for the long term."
"We view the city's management conditions as strong, with good financial practices combined with a capable and experienced management team."
"The stable outlook reflects Worcester's ongoing progress toward strengthening reserves, while remaining active in mitigating the long-term effects associated with its unfunded liabilities. It also reflects our view that the city's underlying economy, strong management, and rather predictable operating profile should translate into it maintaining balanced operations."
Moody's Investor Service and Fitch Ratings reaffirmed their ratings, with Moody's at Aa3 and Fitch coming in again with a solid AA-. All three agencies point to the city's robust revitalization progress and our diverse tax base. They also highlight the redevelopment progress at CitySquare, the intermodal transportation center at Union Station, the vibrancy of Downtown, and the completion of the CSX expansion. Members of my Cabinet, City Auditor James DelSignore and I, complemented by members of Unibank Fiscal Advisors, presented over two days to these three independent bond rating agencies. The agency rating sessions were held at our "Blue Ribbon" Worcester Technical High School where their lead analysts were able to tour the facility and hear directly from Principal Sheila Harrity, national Principal of the Year. All were very, very impressed with the School, the staff, the curriculum, the partnerships and the impressive graduation and career results. It was most certainly a measure of pride for all of us to hear all their compliments on Tech's 21st Century education model changing young lives and our local economy to the positive.
Our bond-rating presentation was a synopsis of the strategic decisions implemented in these difficult economic times to continue to position the City for continued growth. The in-depth details presented included: an overview of the city's financials and our adherence to the Five Point Financial Plan; our continued general fund "rainy day" fund reserve-building now up over 5% (for perspective, our general fund reserve was less than 1.9% prior to implementing the Five Point Financial Plan in the Fall of 2006, when the prospects of reserve withdrawals was imminent just to meet basic operations); debt- service management (borrow only what we can reasonably afford to pay back); and plans and actions to address to our long-term liabilities such as OPEB. Collectively, the entire team presented a comprehensive and compelling review of Worcester's strong financial management, forward-thinking infrastructure investments, and the robust economic development agenda for the future.
The bankruptcy of the great City of Detroit is what could happen when the eye is taken off the prize. It does not have to be that dramatic. Pick up the newspaper daily and your will read great cities like San Jose or Stockton, CA, Providence RI, Central Falls, RI and others, even closer by, that are not able to meeting their basic obligations without draconian measures. We stay true to our financial plan - future focused - we live within our means and address our budget busters early on. We build-up our reserves and make strategic infrastructure improvements - all while in the midst of the worst economy since the Great Depression.
Here are some comments about Worcester from both Moody's and Fitch analysts' reports:
"Worcester's recent trend of positive operations and historically strong fiscal policies has bolstered its financial profile. The improvement in the city's finances has occurred despite pressure the last few years from state aid cuts, increases in employee benefit costs, and a weakness in economically sensitive revenues. To offset these financial pressures, management instituted operational reforms, reduced staff levels, and continues to make conservative budgeting decisions. These actions, along with constant budget monitoring, contributed to the city's positive operating results in the last three fiscal years. A fourth year of positive results is projected for fiscal 2013."- Fitch
"Worcester's stable outlook reflects Moody's expectation that the city has made significant structural changes that will provide for long term fiscal stability. The city's management and elected officials have adhered to its adopted five-point plan, a set of comprehensive financial policies adopted in 2006 to improve financial reporting and forecasting for the city's operating and capital budgets, generate growth in reserves and provide limits for annual general fund borrowing. In addition, the city's proactive approach towards addressing its sizeable long term liabilities for pension and OPEB are indicative of strong management." - Moody's
It is smart, strong fiscal management and it is an accomplishment for which this City Council, my Administration, the City Auditor, the City Clerk and indeed this entire community should take a strong measure of pride. This is a signal to investors who hold and purchase our bonds, to potential and prospective developers and businesses owners, and to the residents of our community that we are a solid long-term investment.
I am grateful to the preparation and the efforts of my team, which included Acting Assistant City Manager Kathleen Johnson, Chief Financial Officer Thomas Zidelis, Chief Development Officer Timothy McGourthy, City Treasurer Mariann Castelli Hier and Chief of Staff Nicole Valentine, as well as Lisa Dickinson, Lynne Foster, and Brianne Ebbeling of Unibank Fiscal Advisors. I would also like to thank the members of my Cabinet and all City employees for the body of work that resulted in this rating.
I would be remiss if I did not express my gratitude to James DelSignore for all his efforts and his partnership in his role as City Auditor in these annual rites of passage (bond rating processes). He is rock solid and knows and understands all we do, every day and through the years, by the audited financials. He is an alternate, objective point of view, with a command of the facts that affirms all our work. He also has a honed sense of humor to lighten the mood every now and then. I will miss his presence during next year's bond rate efforts - but rest assured that Deputy Auditor Stevens was there throughout - readying to fill those shoes.
Finally, I am most grateful to the Worcester City Council, for its collective efforts, guidance, tough decisions and support.
Respectfully submitted,
Michael V. O'Brien
City Manager
