The global credit rating agencies Fitch and S&P this week affirmed the town’s rating of AA+, extending the same AA+ rating that the agencies bestowed on the town last September.
An AA+ rating is the second highest available, signifying a high level of confidence that a borrower is financially sound and has adequate revenue and cash reserves. It’s only one notch below the most coveted AAA, the rating assigned to municipalities least likely to default. Because of the town’s enviable credit rating, it has access to lower borrowing costs, which over time will save the town tens of thousands of dollars in interest.
The AA+ rating was specifically assigned to several Trumbull bond obligations, but the credit ratings are viewed as applying to the town’s creditworthiness generally.
“Our rating on Trumbull reflects our view of the town’s steady financial performance, which has contributed to increasing reserves, supported by strong management, and coupled with a low debt burden,” S&P said in a statement.
In a separate statement, Fitch said, “the ratings reflect Fitch’s expectation that Trumbull will maintain a high level of fundamental financial flexibility given its healthy reserve position and solid expenditure flexibility. The rating also incorporates the town’s wealthy—although slow-growing—tax base, on which revenues can be raised without limit.”
Fitch said it expects prospects for Trumbull’s future revenue growth to be in line with inflation, based on the potential from new development both planned and underway, as well as future appreciation in housing values.
S&P offered a series of bullets in support of the high credit rating it assigned to Trumbull:
- A very strong economy, with access to a broad, diverse metropolitan statistical area.
- Strong municipal management, with good financial policies and practices.
- Adequate budgetary performance, with a slight operating surplus in the general fund balance.
- Strong budgetary flexibility, with an available fund balance in fiscal 2019 of 14.2% of operating expenditures.
- Very strong liquidity.
- Very strong debt position.
- A $1.9 million surplus in 2019, the town’s fifth consecutive surplus.
- Strong property tax collection, averaging 98% over the past five fiscal years.
“We believe that given the town’s well-seasoned management and track record of maintaining its sound financial position during several recessionary periods, the town will continue to maintain structural balance during these difficult times,” S&P said in its statement. “This is particularly important, as we believe future operations will be under stress due to the economic recession.”
Both agencies indicated that the COVID-19 pandemic and the ensuing economic recession is a risk. But both were confident in Trumbull’s ability to weather the crisis.
“Although the full effects of COVID-19 have yet to be determined, we do not believe the town’s economy will weaken,” S&P stated. “Furthermore, we believe continued economic development projects could offset any short-term declines to the grand list.”
In addition, S&P stated that the amount of stimulus money Trumbull might receive has not been determined, but the town has also not included it in its budget assumptions.
For its part, Fitch acknowledged that the outbreak of coronavirus and related government containment measures worldwide “creates an uncertain global environment for U.S. state and local governments and related entities in the near term.”
“While Trumbull’s most recently available fiscal and economic data may not fully reflect impairment, Fitch’s ratings are forward looking, and Fitch will monitor developments in state and local governments as a result of the virus outbreak as it relates to severity and duration,” Fitch said in its statement, adding that it will incorporate revised expectations for future performance and assessment of key risks.
First Selectman Vicki Tesoro said the town’s sustained credit rating is a testament to ongoing financial-management efforts across her administration and management team. “Even in the middle of the worst economic and public health crises of our lifetimes, we’ve maintained our fiscal prudence and kept the town on an even keel,” she said. “This rating ensures we can continue to borrow, as needed, at favorable rates, and that financial institutions continue to have confidence in us. Our underlying fundamentals are not just sound, they’re promising.”