Lowell — Assistant City Manager for Fiscal Affairs Conor Baldwin announced that, after a detailed presentation to a team of credit analysts from Moody’s Investor Services, the ratings agency has upgraded the City of Lowell’s credit rating from ‘A1’ to ‘Aa3.’
The credit upgrade marks a significant achievement for the finance team and the City, as it not only recognizes the Administration’s strong financial management, but also the enormous economic development potential on the horizon.
Baldwin tells InsideLowell the increase is the first since Standard & Poor’s bumped the city up in the Fall of 2013 and Moody’s similarly did so in 2014, at the tail end of Bernie Lynch’s tenure as City Manager.
The improved rating should be a significant financial boon to the Mill City, resulting in significant savings in future borrowing on projects like Lowell High School and allowing the city to issue “Refund Bonds” on past debt, which are essentially like refinancing a mortgage at a lower rate.
“We issued $50.9 million in October and the rate was 3.75%” Baldwin said. “If we issued on the upgraded rate in the future, hypothetically it could be 3.25%. That’s big savings over the 30 year term. The estimates savings is $5.2 million over the term, or about $172k per year. We have a lot of debt to issue for sewer separation and the CC authorized $175 million loan order this past June. The difference in interest on $175M between a 3.75% and 3.25% rate is $17.8 million over 30 years, or $594k per year.”
The work of the entire finance team, as well as the input of the Department of Planning and Development (DPD), was instrumental in demonstrating the very strong financial management at City Hall as well as the strong potential in the local economy.
Moody’s Investor Service is among the world’s most respected, widely utilized sources for credit ratings, research, and risk analysis. Moody’s long-term obligation ratings are opinions of the relative credit risk of fixed-income obligations with an original maturity of one year or more. They address the possibility that a financial obligation will not be honored as promised. The ‘Aa’ category of their rating scale is among the highest possible rating for investment-grade obligations, and obligations rated ‘Aa’ are judged to be of high quality and are subject to a very low credit risk.
Prior to the latest credit upgrade, the City received competitive bids from bond and note underwriters on Wednesday, October 9, 2024, for a $50,945,000, 30-year general obligation state qualified bond issue and a $4,432,623 359-day bond anticipation note issue. J.P. Morgan Securities LLC was the winning bidder on the Bonds with an average net interest rate of 3.75%. TD Securities was the winning bidder on the Notes with a net interest cost of 3.28%.
Before the October sale date of the bonds, City Manager Thomas A. Golden, Jr., and his Administration sought approval to issue State Qualified Bonds by appearing before the Municipal Finance Oversight Board (MFOB) on August 14, 2024. The board, chaired by State Auditor Diana DiZoglio, met to consider the financial condition of the City and unanimously granted approval. Furthermore, the representative from the Massachusetts District Attorney’s Office complimented the City of Lowell on its efforts to expand affordable housing.
The City received a total of 9 bids on the Bonds and 3 bids on the Notes. Bond and Note proceeds will be used to finance various municipal projects, including $21.3 million to fund the City’s local share of the Lowell High School construction project, $7.26 million in citywide paving projects, and $10.6 million in various building improvements to Lowell Public School buildings and other municipal facilities.
The bonds also included, for the first time in Lowell’s history, $1.5 million for the acquisition of Rollie’s Farm using future commitments of the City’s Community Preservation Act (CPA) surcharge revenue.
“Recent economic developments in Lowell, such as the Lowell Innovation Network Corridor (LINC) and other exciting initiatives supported by the City Council, together with the great work by the finance team to maintain solid fiscal policies and practices, have led to this credit upgrade by Moody’s,” said City Manager Golden. “I am so proud that Moody’s has recognized the City of Lowell’s strong financial management environment and budget planning strategies, which are the cornerstone of a stable and sustainable financial future for our great city. I am grateful to Mr. Baldwin and his team for the presentation they made and for all they do to keep our City finances and budget consistently well-performing.”
“The whole finance team has been hard at work throughout the summer to put together the financing for this bond sale,” Baldwin added. “We are pleased with the level of competition in the market and the interest rate on the sale. When we projected the debt service for the Lowell High School project, we knew that maintaining strong fiscal discipline was the most prudent way to mitigate the impact to the taxpayers and it is great to see that we have, once again, been able to obtain an interest rate lower than our projections back in 2019.”
