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10/24/2017 11:45 AMSince October 16, North Branford has been tagged with a "negative outlook" on outstanding debt by Moody Investor Services, due to anticipated actions the town might have to take to respond to additional cuts and costs that could come down when a final state budget is approved. North Branford was one of 25 Connecticut towns to receive a negative outlook from Moody's in a report issued Monday, Oct. 16.
The latest round of Connecticut's budget battles saw legislators succeed with a bi-partisan vote on a revised state budget in the early morning hours of October 24. At this point in time, however, questions still remain on what positive municipal impacts the changes may have versus the drastic measures Gov. Dannel P. Malloy has been pursuing. As of last week, when the revised legislative budget was being proposed, North Branford stood to be cleared of $3.2 million of the governor's $5.5 million proposed additional deficit to the town.
At the Oct. 17 Town Council meeting, North Branford Finance Director Anthony Esposito said the legislative budget that was being considered for passage this week looked as if it would instead deliver a $1.2 million additional deficit to the town.
"So while it's still terrible, it's not as terrible as the five and half million we were at last week," Esposito told the council.
Earlier in October, the council reviewed possible scenarios the town could have to undertake, including potentially sending out additional tax bills in January, 2018, to come up with revenue needed to meet potential additional state budget deficit impacts (see the story here )
The Oct. 16 Moody's status change for North Branford is directly related to the anticipated cuts in funding which could impact the town based on the governor's recent actions. According to the Moody's report, North Branford was assigned the status as it falls into a category of 11 towns which could, "in the absence of other revenue measures or cuts in expenses," have to raise property taxes by 10 percent or more to make up for a potential decline as shown by the governor's executive order (as of Oct. 16, 2017; see related document).
"The bad news is our town's name is among towns that were listed as having a negative outlook," Esposito told the council on Oct. 17.
While the news is grim, North Branford avoided the fate of 26 other towns which received an ominous "under review for downgrade," from Moody's. Esposito explained the downgrade status causes, "...a significant hindrance to your ability to borrow in the future."
By contrast, "...a 'negative outlook' is more like a black eye," said Esposito. "And while it says it effects the [combined 25 towns'] $3.45 billion dollars of outstanding debt, [it] won't effect our interest rate which we have already bonded for. What it effects is if you are the person holding our paper; you might have bought for maybe a dollar or two on a dollar note [so] it might be worth 98 cents on the dollar now."
The change could also impact the town's future borrowing ability by a slight margin, said Esposito, by making it less lucrative to potential investors.
"These impacts hurt the value of our stock in investment circles. The bond holders are the ones who are going to feel the inability to recoup their money or get a lesser value for their stocks they own for any of these towns that have a negative outlook or potential downgrades," said Esposito.
In response to questions from council members regarding the potential for the negative outlook status to be removed by Moody's, Esposito said it could happen. The best possibility of a removal of the status would arrive if North Branford is not handed any additional state deficit to deal with, he said.
"They may reverse their position if we are made whole, or close to whole," said Esposito.