Nashua receives AAA score
City now has better credit than state, federal governments
NASHUA – City officials received good news this week as financial firm Standard & Poor’s upgraded the city’s bond rating to AAA, a better rating than both the state of New Hampshire and the United States.
“We’ve been trying for eight years to get AAA from S&P,” said David Fredette, Nashua’s treasurer and tax collector.
The news came as Nashua is seeking to bond out about $13 million this year, Mayor Jim Donchess said. The city typically bonds around $15 million to $20 million to pay for major capital projects. While Nashua has had a AAA rating with the firm Fitch Ratings, the S&P AAA rating means it will be able to get slightly lower interest rates on the bonds.
More importantly, Donchess said, is that the better bond rating means S&P is giving its stamp of approval to the city’s overall operations.
“It means the city is really well run,” Donchess said.
In the S&P report on Nashua’s new bond rating, S&P analysts cite the city’s strong economy and strong management as reasons for the upgrade.
“The upgrade reflects the city’s improved local economy, based on strong property values and improved employment growth and diversity, coupled with management maintaining strong management policies and procedures and very strong budgetary flexibility,” the report states.
Nashua now has a better bond rating than New Hampshire, which gets AA from S&P, and the U.S. government, which gets between and an A-1+ and an AA rating from S&P. The rating report states that Nashua is better able to meet is obligations than the federal government.
“We rate the city higher than the nation because we believe Nashua can maintain better credit characteristics than the nation in a stress scenario, based on its predominantly locally derived revenue base and our view that pledged revenue
supporting debt service on the bonds is at limited risk of negative sovereign intervention,” the report states.
“In fiscal 2016, local property taxes generated 75 percent of city revenue, which demonstrated a lack of dependence on central government revenue.”
Donchess said the city’s employees, such as Fredette, have been instrumental in making sure Nashua has the management that attained the better rating. The city regularly runs a budget surplus, and it is careful with taxpayer money, he said.
Nashua is now the only city in New Hampshire with AAA ratings from both Fitch and S&P, Fredette said.
The city submits to regular financial reviews by both Fitch and S&P, which take into account the overall economy, the strength of the local government, the housing market and other factors in issuing the rating.
“We’ve had a strong economy for the past three to four years,” Fredette said.
The report notes that Nashua is a key financial hub for the state and region, first being a retail magnate, but recently with strong performance in a broad ranges of industries.
“Nashua serves as a key commercial and industrial center for the state. It also has a role as a dominant regional hub for retail trade due to New Hampshire’s lack of a statewide sales tax and its close proximity to several Massachusetts communities,” the report states. “In addition to the strong retail base, high technology and health care have recently emerged as major industries for the city.”
The report does contain caution about the future of Nashua’s financial outlook when it comes to pension liabilities. Nashua’s payment for the New Hampshire Retirement System is going up from $21 million to $23 million in fiscal 2018, which starts July 1. This increase is already putting pressure on the city budget with its spending cap, and the S&P report indicates concern if retirement costs keep going up.
“We believe increasing retirement costs could pressure the budget beyond our
two-year horizon, which could potentially weaken the city’s debt and contingent liability profile in the future,” the report states.
The S&p report states it will keep Nashua’s AAA rating for the next two years, although that could change if the city’s economy and the budget take a downturn. The S&P reports states such a series of events is unlikely for the next two years.
Damien Fisher can be reached at 594-1245, firstname.lastname@example.org or @Telegraph_DF.