$17.5M Bond Sale
The Town of Cheshire sold $17.5M in bonds on February 22, 2017 at a very favorable interest rate of 2.82% well below our estimate of 4.0%, which will yield approximately $1.7M less interest costs over the 20 year life of the bonds than we had projected. The Town received 8 bids ranging from 2.82% to 2.94% and the sale of the 20-year General Obligation bonds was awarded to the low bidder, Robert W. Baird & Co., Inc. Proceeds from this bond sale will finance 40 capital projects for land acquisition and infrastructure improvements that were adopted in recent capital budgets, including road repavement, upgrade and expansion of the public safety radio communication system, fire truck pumping engine, bridge and drainage improvements, heavy equipment rolling stock acquisitions, pump station rehabilitation, park improvements, various school improvements and building upgrades.
We also received a premium of $712, 609.51 which is cash that will be conveyed to the Town at the bond closing, which is to be used to pay down current and future debt.
The Town worked with its financial advisor, Matt Spoerndle, Senior Managing Director at Phoenix Advisors, LLC, and bond counsel, Robinson and Cole, LLC to bring this issue to market. With the guidance of Mr. Spoerndle we worked diligently to sustain a credit rating of “AAA” from both rating agencies, Standard and Poor’s Global Ratings and Fitch Ratings.
In preparation for this bond sale Town staff made a formal presentation on February 7, 2017 to these rating agencies at their respective offices in New York City.
Since AAA is the highest credit rating awarded by these agencies, this formal presentation was critically important in order to adequately present our case for sustaining this credit rating distinction. Connecticut municipalities are undergoing greater scrutiny from the rating agencies due to the State’s continuing fiscal problems and the erosion of municipal aid making it additionally important for a formal presentation.
The outcome of our efforts was released on February 14, 2017 by Standard and Poor’s and by Fitch on February 16, 2017. Both agencies sustained our rating as “AAA,” even in light of the State’s fiscal problems.
“The Town should be very pleased with the results of a very successful sale. Clearly, the Town’s exceptional bond ratings had a great impact on the results, keeping the cost of borrowing as low as it could be.” said Mr. Spoerndle.
The importance of having two “AAA” credit ratings is manifold but the immediate benefit was that the $17.5M in General Obligation bonds sold well below the 4.00% interest rate we assumed, thereby generating significant interest savings from our projections.
The agencies cited Cheshire’s “strong financial position,” “very strong economy,” and “very strong institutional framework” as some of the rationale for the ratings.
The Town is extremely pleased by the very low interest rate received as well as sustaining the highest credit rating from each agency, especially given the economic challenges that we’ve encountered since the recession of 2008.