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Norwalk CFO: AAA rating not endangered

‘Sigh of relief,’ Dachowitz says

Norwalk Board of Estimate and Taxation discusses Triple A bond rating.
Monday’s Board of Estimate and Taxation meeting on Zoom.

NORWALK, Conn. — One of the country’s leading rating agencies has changed its methodology, alleviating Norwalk fears about extensive capital borrowing endangering its Triple A bond rating, according to Norwalk Chief Financial Officer Henry Dachowitz.

Dachowitz has repeatedly warned that the City faces a “formidable financial challenge” in financing its previously approved expenditures in addition to the requested 25-year $450 million school building program and the yearly capital budget items. Last year, he quoted Bill Lindsay of Munistat Services, the City’s financial advisor, as predicting Norwalk will lose its Triple A bond rating within three years.

Norwalk has about $360 million in outstanding bonds and Lindsay has warned that if the total gets to $400 million, then “we are getting into a dangerous zone regarding our triple A bond rating,” Dachowitz said at Monday’s Board of Estimate and Taxation meeting.

But Lindsay has changed his tune and recently raised the threshold to $500 million, according to Dachowitz.

The CFO said he and Mayor Harry Rilling were going to tell department heads some of their projects couldn’t move forward because the City could only bond an additional $40 million this year. He therefore called the City’s financial advisor and asked for a formal memo detailing how much debt the City could incur and retain its Triple A bond rating.

He was told that Moody’s Investors Service has just changed its analytical framework, he said. Quite a few Connecticut municipalities were put on credit watch, but not Norwalk.

“He came back two weeks later, he said, ‘good news.’ Based on the new methodology, we are going to be viewed even more favorably than we were in the past. And we have a limit, he estimates, of 500 million,” Dachowitz said.

Thank the pension and OPEB (Other Post-Employment Benefits) trust funds, which Dachowitz called “well-funded.”

“Our four different pension funds are funded at about 75% of accrued liability. And our OPEB is over 95% accrued,” Dachowitz said, adding context by explaining that more than half of Connecticut towns do not have an OPEB fund and the State is about 50% funded on its pensions.

“We were doing very well, but it wasn’t in the formal calculations. Now it is and allows us even more room,” he explained. “So we all breathe a sigh of relief, because we hate to say no to anybody who has an authorized capital project.”

The comments came as the BET approved the issuance of $48,440,692 in general obligation bonds to meet the appropriations in the capital budget approved by the Common Council recently. That includes $10.8 million to the Water Pollution Control Authority (WPCA), an Enterprise Fund that will make payments on the debt itself.

“We really went over the capital requests, again, with a fine-tooth comb, trying to look at what was absolutely needed and what would be consistent with our POCD (Plan of Conservation and Development),” Rilling said, listing school projects, including $1 million for school security. “We increased our paving amount, and we’re looking at our coastal resilience, we’re trying to do everything we can to keep the spending within reason, but also to make sure that we move the city forward in the proper direction.”

“I’m still working on the cash flow estimates, I think we’re going to end up with 60 or 65 million for the bonds for this summer, not as high as last year’s 82 face value, 90 total proceeds,” Dachowitz said. “But again, since it is larger than this year’s capital budget, we are starting to borrow for all those prior capital projects that were authorized but never borrowed and bonded before.”

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