Moody’s Assigns City of Framingham Aa2 Bond Rating; Gives ‘Negative Outlook’

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FRAMINGHAM – Moody’s Investors Service has assigned a Aa2 rating to the City of Framingham, MA’s $31.1 million general obligation municipal purpose loan of 2022 Bonds.

Moody’s maintains the Aa2 issuer rating and Aa2 rating on the city’s outstanding general obligation limited tax (GOLT) bonds. The issuer rating is equivalent to the city’s hypothetical general obligation unlimited tax (GOULT) rating.

There is no debt associated with the issuer rating, said Moody’s in a press release.

“The outlook is negative,” said Moody’s.

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Post issuance the city will have $285.8 million in outstanding general obligation debt, said Moody’s

“The Aa2 issuer rating reflects the city’s sizeable tax base with a large and diverse economy, above-average resident income and wealth, slightly elevated debt burden and manageable long-term liabilities. The rating also incorporates a satisfactory financial position that has, however, recently declined due to the use of reserves for the operating budget, a one-time use towards a school project, as well as operating challenges in the utility enterprise fund. The absence of distinction between the GOLT rating and the issuer rating reflects the city’s ability to override the Proposition 2 1/2 tax levy cap and its pledge of its full faith and credit,” said Moody’s in its press release issued July 11..  

“The negative outlook reflects the recent decline in the financial position due to a greater use of reserves and limited property tax revenue increases that have resulted in a structural operating imbalance. The outlook also incorporates uncertainty around the city’s large commercial sector that has been impacted by the coronavirus pandemic and the potential for it to limit the city’s ability to stabilize its financial operations,” said Moody’s

“Moody’s made it clear last year that the outlook would likely change, so unfortunately this is not a surprise,” said City Council Finance Subcommittee Chair George P. King Jr.

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“The disastrous handling of the water and sewer enterprise fund by the previous administration was the major reason for this.  The new administration has inherited a financial mess and this is one more symptom.  They have taken great strides during the first six months to turn things around and I am confident they will ultimately do that,” said at-large City Council King.

Moody’s said the rating could be upgraded if there was material growth in reserves, significant decline in leverage from debt, and strengthening of resident income levels,” explained Mayor Charlie Sisitsky.

 However, the City’s rating could be downgraded if there was further decline in general fund reserves beyond fiscal 2021 levels and an inability to structurally balance the operating budget.