Moody’s Investors Service is expected to review Hingham’s credit rating over the next two months, to determine whether the town can keep its AAA rating.
The review comes at the town’s request, after Moody’s last week gave a “negative outlook’’ to Hingham, 11 other communities, and two regional school districts in the state. All have the highest rating of AAA, but amid anxiety over the national debt and economy, Moody’s said it will be watching for the possibility of downgrades.
Although the influence of the national debt suggests that the municipality relies heavily on Treasury bonds and federal funds, Hingham Town Administrator Ted Alexiades said that wasn’t the case for his town.
“I spoke with the folks at Moody’s and they indicated that this was not a Hingham decision, this was about all their AAA credits,” Alexiades said. The review is occurring, Alexiades said, because of Moody’s assertion that municipalities are inherently affected by the government’s spending on defense contracts, healthcare, and higher education.
Although Alexiades said Hingham is not affected by defense spending or higher education, and only minimally by healthcare facilities, the town will be reviewed nonetheless, because many people who live in the community work in these fields, he said.
All of the communities that received a negative outlook are AAA rated, said David Jacobson, a Communications Strategist for the Public Finance Group for Moody's. However, not all AAA-rated communities were affected.
Hingham officials have asked that a review happen quickly, as the bond rating will become especially important when the municipality authorizes debt for a possible $50 million Middle School and $1 million in renovated athletic facilities within the next year.
Although a “negative outlook,” which the town had three years ago, would have a minimal impact, the consequences would be significant if the credit rating were downgraded.
“If we were to drop down, that would mean that we would pay higher interest costs when we issue debt … [Also] there have been times when access to the markets was denied…people didn’t bid on your debt. Municipalities have had to pull issues off the table because they were undersubscribed,” Alexiades said.
However, officials are hopeful that a potential downgrade, which the town could expect to see within the next 18 months, would not lessen investor confidence.
“I’m confident that the market, in spite of the negative outlook … will see Hingham for the market that it is – outstanding finances, outstanding level of services, and citizens that have been willing to pay for the services they’ve requested,” Alexiades said.
Moody’s is one of three bond-rating agencies that the town solicits reviews from. Standard & Poor’s and Fitch Group, the remaining two, have told Hingham officials that they will not change the municipality’s score.
In the meantime, Hingham officials have remained adamant that if the town’s rating is to be reviewed because of a larger, global shift, then all municipalities should be reviewed in the same light.
“I think what we’re seeing though is all the credits being notched down one notch in the US,” Alexiades said. “How could you knock Hingham down one notch and not adjust the others?”
Other Massachusetts entities that received a negative outlook last week were the towns of Action, Bedford, Belmont, Brookline, Concord, Dover, Lexington, Newton, Wayland, Wellesley, and Weston, as well as the Concord-Carlisle and Lincoln-Sudbury regional school districts.
Nationwide, five states and 161 local governments received the designation from Moody’s.