This is the Moody’s rating of the town for the purposes of the recent bond financing for the purchase of the Red Gate Farm and the new water tower and water main along Hospital Road.  Basically they rate us as Aa1.  Interesting to see how outsiders rate our town’s strengths and weaknesses.

New Issue: Moody’s assigns Aa1 to Medfield, MA’s $7.2M GO Bonds
Global Credit Research – 25 Sep 2014
Town has $36.5M GO bonds outstanding
MEDFIELD (TOWN OF) MA
Cities (including Towns, Villages and Townships)
MA
Moody’s Rating
ISSUE RATING
General Obligation Municipal Purpose Loan of 2014 Bonds Aa1
Sale Amount $7,200,000
Expected Sale Date 10/01/14
Rating Description General Obligation
Moody’s Outlook NOO
Opinion
NEW YORK, September 25, 2014 –Moody’s Investors Service has assigned a Aa1 rating to the Town of
Medfield’s (MA) $7.2 million General Obligation Municipal Purpose Loan of 2014 Bonds. Concurrently, Moody’s
has affirmed the Aa1 rating on the town’s $36.5 million of outstanding general obligation debt. Approximately $1.4
million of the bonds are secured by the town’s unlimited general obligation tax pledge as debt service has been
voted exempt from the levy limitations of Proposition 2 ½. Debt service on the remaining $5.8 million secured by a
limited tax pledge, given that it is subject to the levy limit. Bond proceeds will fund the construction of a water main
replacement project and land acquisition.
SUMMARY RATING RATIONALE
The Aa1 rating reflects a sound financial position that includes planned use of reserves, stable residential tax base
with strong wealth levels and a modest debt and pension liability.
STRENGTHS
– Sound financial position with healthy reserve levels
– Stable tax base with strong wealth levels
– History of voter approvals for overrides and exclusions of Proposition 2 ½
CHALLENGES
– Limited levy capacity and budget flexibility due to Proposition 2 ½
– Planned appropriation of reserves
DETAILED CREDIT DISCUSSION
SOUND FINANCIAL POSITION WITH HEALTHY RESERVE LEVELS DESPITE ANNUAL APPROPRIATIONS
Medfield will maintain a healthy financial position over the near term given conservative budget practices and
limited, planned draws on reserves. Over the last five years, the town has averaged an annual operating deficit of
$1.2 million, balancing annually operations through the use of planned draws on restricted fund balances attributed
to debt exclusions for school building projects (approximately $1.3 million) and free cash appropriations and other
available funds if needed. In fiscal 2013, the town appropriated $500,000 of Free Cash to balance operations and
$1.3 million from restricted fund balance as part of its annual draw-down of Massachusetts School Building
Authority (MSBA) grant funds to cover school related debt service. Positive variance in both revenues and
expenditures replenished the Free Cash appropriation and offset a portion of the draw on restricted reserves.
Audited financials reflect an operating deficit of $981,000 and contributed to a decline in the available fund balance
to $7 million or 13.2% of revenues. The total fund balance remains healthy at $23.1M, or 43.5% of revenues.
Reserves include $12 million in MSBA grants restricted for school debt service which will be gradually drawn
down through 2023.
The fiscal 2014 year-end estimates reflect similar operating results as in 2013. Due to an increase in Free Cash at
the end of 2013, the town appropriated $910,000 for operations and capital needs. Projections indicate revenues
from local receipts were over budget by $318,000 and expenditure turn backs of $534,000 will help to offset a large
portion of the reserve appropriations with minimal changes to fund balance levels. The fiscal 2015 budget
increased by 4.4% and is balanced with a tax levy increase of 1.4%, a $1.3 million appropriation of Free Cash, and
a $1.3 million appropriation from the debt service reserve.
Medfield derives the majority of its revenues from property taxes (67% of 2013 revenues) and continues to benefit
from a strong collection rate of 99% within the fiscal year. Positively, the town benefits from a recent history of
voter-approved general overrides to the Proposition 2 ½ tax levy limit. In each of 2008, 2009 and 2012, the town
passed a override to aid in general operations of the town and education expenses, providing some additional
revenue flexibility. Our ongoing assessment of the town’s credit quality will factor in management’s ability to
continue to maintain a nominally balanced budget with sound fund balance levels.
STABLE RESIDENTIAL TAX BASE WITH STRONG WEALTH LEVELS
Medfield is a primarily residential community (94% of the 2014 assessed valuation) with a population of 12,024,
located approximately 20 miles southwest of Boston (Aaa stable). The town’s $2.4 billion tax base is expected to
remain stable with limited growth, reflecting a slow but gradual turnaround in the regional real estate market.
Assessed value increased 1.4% in 2014, bringing the five-year compound annual decline to -0.5%. The town’s
equalized value per capita remains strong at $197,461, reflecting the strength of the residential sector. In addition,
the town has a number of residential developments underway, including new construction of high-end apartments
and condos which will continue to provide annual new growth revenue. Wealth levels are also substantially higher
than state and national averages, with median family income well over two times the national average. Also, the
town’s unemployment rate of 5.4% (July 2014) continues to fall below the state (6.1%) and US (6.5%).
MODEST DEBT AND PENSION LIABILITY
Medfield’s debt position is expected to remain manageable, given its modest direct debt burden of 1.5% of
equalized value and average principal amortization of 77% within 10 years. The town currently has no authorized
but unissued debt; although it has a number of projects planned in the coming years, including a new public safety
building with an estimated cost of $19 million. Approval of future projects would include debt exclusions from
Proposition 2 ½. The town’s portion of school debt represents over half of the total debt outstanding, and after
factoring in the $12.2 million MSBA grant, the adjusted debt burden drops to 1.4%. Fiscal 2013 annual debt service
represented 8.7% of expenditures and the entire debt portfolio consists of fixed rate debt with no exposure to
derivative products.
The town participates in the Norfolk County Contributory Retirement System, a multi-employer, defined benefit
retirement plan. The town’s annual required contribution (ARC) for the plans was $1.6 million in fiscal 2013, or
2.9% of General Fund expenditures. The city’s 2012 adjusted net pension liability, under Moody’s methodology for
adjusting reported pension data, is $26 million, or a below average 0.51 times General Fund revenues. Moody’s
uses the adjusted net pension liability to improve comparability of reported pension liabilities. The adjustments are
not intended to replace the town’s reported liability information, but to improve comparability with other rated
entities.
WHAT COULD MAKE THE RATING GO UP
– Increased budget capacity and flexibility
– Material increase in available and unassigned fund balance
– Large increase in tax base size
WHAT COULD MAKE THE RATING GO DOWN
– Prolonged operating imbalance resulting in a decline in available reserves
– Significant reduction total reserves
– Material decline in tax base or demographic profile
– Significant increase in debt burden
KEY STATISTICS:
2014 Equalized Valuation: $2.4 billion
2014 Equalized Value Per Capita: $197,461
Median Family Income as % of US Median: 230.3%
Fiscal 2013 General Fund balance as a % of Revenues: 13.2%
5-Year Dollar Change in Fund Balance as % of Revenues (2009-2013): 3.0%
Fiscal 2013 Cash Balance as % of Revenues: 44.3%
5-Year Dollar Change in Cash Balance as % of Revenues (2009-2013): -0.96%
Institutional Framework: “Aa”
5-Year Average Operating Revenues / Operating Expenditures (2009-2013): 0.98x
Net Direct Debt as % of Full Value: 1.5%
Net Direct Debt / Operating Revenues: 0.68x
3-Year Average of Moody’s ANPL as % of Full Value: 1.08%
3-Year Average of Moody’s ANPL / Operating Revenues: 0.50x
The principal methodology used in this rating was US Local Government General Obligation Debt published in
January 2014. Please see the Credit Policy page on http://www.moodys.com for a copy of this methodology.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory
disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class
of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance
with Moody’s rating practices. For ratings issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating
action for securities that derive their credit ratings from the support provider’s credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in
relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where
the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner
that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for
the respective issuer on http://www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating
outlook or rating review.
Please see http://www.moodys.com for any updates on changes to the lead rating analyst and to the Moody’s legal
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Please see the ratings tab on the issuer/entity page on http://www.moodys.com for additional regulatory disclosures for
each credit rating.
Analysts
Nicholas Lehman
Lead Analyst
Public Finance Group
Moody’s Investors Service
Heather Guss
Backup Analyst
Public Finance Group
Moody’s Investors Service
Geordie Thompson
Additional Contact
Public Finance Group
Moody’s Investors Service
Contacts
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Joy Ricciuto, the Town Accountant, attended the selectmen meeting last night, and gave a great presentation that both summarized the essential functions of her position and provided the current status of her calendar tasks.  What follows are her notes for the presentation –

The fiscal year 2014 closing and reconciliation process is fully underway, FY14 cash is fully reconciled to the Treasurer, tax accounts (real estate + Excise) are reconciled, and school ac’s, grant, revolving funds are in progress,                 Water funds, Sewer funds, Trust & Stabilization funds are next.

Reconciliation and closing process occurs during August and September, around October for fixed assets.

Fixed assets purchased during the year are updated, deprecation for the year calculated., all this info go into the Town’s financial statements as per GASB (governmental accounting standards board) statement #34.

GASB 34 is accounting for fixed assets and was implemented back in 2003

After the reconciliation process, the Town Accountant looks carefully at reservations of fund balance as a part of the closing process.

In August we need to set aside a couple weeks to assist the School dept on the School End of Year report that is filed with the Dept of Elementary & Secondary Education (DESE formerly DOE). We calculate the costs the town spends on behalf of the School department that does not show up on the School’s operating budget in the town meeting warrant report,

those costs consists of health insurance, the 62% the town pays for each active employee, the 50% the town pays for the School retired employees, plus basic life insurance costs, prop+ liab insurance, unemployment claims, and school debt principal and interest payments, school employees share of the unfunded pension liability, and other costs incurred by town departments on behalf of the school department.

October/November is schedule A month, it takes approx a month to create worksheet schedules and record all town     spending and revenues by dept and to record each grant received in a report due to the State November 30th, which culminates in the final closing process in the financial software which moves the balance sheet account balances into the new   fiscal year, and ends with the Town Accountant’s calculation of the Town’s free cash.

November is also when the tax recap process (tax rate setting) begins which takes a couple of weeks, and when the annual budget process for the next fiscal year begins. Accountant’s office is responsible for the budget worksheet packets which include historical info that are distributed to the department heads.

The town’s independent Auditors are scheduled for two weeks of field work at the town hall in November beginning November 17th. A lot of prep work prior to their arrival. The firm name is Powers & Sullivan out of Wakefield.

The past fiscal year saw the conversion and integration of the School department’s financial records onto the town’s Munis financial software. Since early spring this has been an enormous project, with the School department    hiring an outside consultant to expand and create a newer, better revised chart of accounts with account numbers that                 mirror the State’s DESE account numbers and still retains the characteristics of the Town’s current State UMAS compliant g/l structures. (UMAS= unified mass muni accounting system). During the conversion process we were without a School Business Manager from mid April till June 30, the School staff were off during July and August and now with school back in session, the staff is back and still trying to log on to the new software for the first time and the new school Finance Director/Business Manager Michael LaFrancesca has been extremely responsive and proactive getting school staff on and training them as users himself.

We will need to engage a GASB 45 OPEB actuary to update/perform another study this January 2015.Bienniel requirement.

(OPEB = Other Post Employment Benefits) to determine the town’s current OPEB liability.

Guestimate- free cash to remain upwards of $2.m

$1.3 m in free cash appropriated at the April 2014 town meeting

$1m recovered

$541,000 departmental turnbacks, received $381k in local receipts over projections, FY14 snow deficit was $164,766 to be raised in FY15

Per the State, reserves are a necessary component of sound fiscal management and bond rating agencies expect the town to maintain reserves for good financial stability in order to prevent sharp fluctuations in the tax rate and to satisfy bond rating agencies and the investors.

The Massachusetts Municipal Association issued the alert below today with its summary analysis of the salient provisions of the state budget that the Governor signed this morning.  The major take away for towns is that their monies are up over $50m. from the Governor’s starting budget in January, and up over last year.

Friday, July 11, 2014

GOVERNOR SIGNS FISCAL 2015 STATE BUDGET

Approves Legislature’s Appropriations on Key Municipal and Education Aid Accounts

At 9:45 this morning, ten days after receiving the $36.5 billion fiscal 2015 state budget from the Legislature, Governor Patrick signed the budget into law, approving approximately $50 million more in overall funding for municipal and school aid accounts than the budget he originally filed in January.

$25.5 MILLION INCREASE FOR UGGA AND $99.5 MILLION INCREASE FOR CHAPTER 70 FINALIZED
The fiscal 2015 budget increases funding for several key municipal and education aid accounts, including a $25.5 million increase in Unrestricted General Government Aid (UGGA) and a $99.5 million increase in Chapter 70 funding – these are the same funding levels that were announced in the Legislature’s March local aid resolution.

GOVERNOR SIGNS FULL FUNDING FOR SPECIAL EDUCATION CIRCUIT-BREAKER
The final budget plan supports full funding for the Special Education Circuit-Breaker Program, using the Legislature’s calculation to arrive at the full funding number of $260.4 million, a $5 million increase over fiscal 2014.  

GOVERNOR SIGNS $18.7 MILLION INCREASE FOR REGIONAL SCHOOL TRANSPORTATION REIMBURSEMENTS AND $2.24M FOR TRANSPORTATION REIMBURSEMENTS FOR OUT-OF-DISTRICT VOCATIONAL STUDENTS
The budget signed by the Governor includes the Legislature’s recommendation to increase regional school transportation reimbursements by $18.7 million, a 36% boost over the current year, raising the appropriation to $70.25 million.  This is a major victory that will bring the state to 90% of full funding, the highest level in a generation.  The budget also includes $2.24 million for transportation reimbursements for out-of-district vocational students.  This is down slightly from the fiscal 2014 budget, but is a significant improvement over the Administration’s initial budget, which would have eliminated the program.

FINAL BUDGET LEVEL FUNDS PILOT PAYMENTS
The final fiscal 2015 budget signed this morning maintains funding for the payments-in-lieu-of-taxes (PILOT) program at the current $26.77 million level, which is $500K higher than the Administration’s original proposal.  

FINAL BUDGET INCREASES FUNDING FOR THE SHANNON ANTI-GANG GRANT PROGRAM
The Governor approved $8.25 million for the Shannon anti-gang grant program, a $1.25 million increase to a program that provides essential funding to help cities and towns respond to and suppress gang-related activities.
 
FINAL BUDGET PROVIDES $4.6M FOR THE SAFE AND SUCCESSFUL YOUTH INITIATIVE
The Governor approved funding for the Safe and Supportive Youth Initiative at $4.6 million in fiscal 2015. The program seeks to reduce youth violence through wraparound services for those most likely to be victims or perpetrators of gun violence.

FINAL BUDGET INCLUDES LANGUAGE TO SHARE STATE SURPLUS TO INCREASE STATE’S CPA MATCH
In recent years, the state’s match for the Community Preservation Act has been significantly underfunded.  The fiscal 2014 budget adopted last year included a provision to use end-of-the-year surplus revenues from fiscal 2013 to boost reimbursements by $25 million, breathing new life into the state’s CPA match.  Because of lagging deeds excise collections, this money was added to the CPA program to double the state match, from 26% to about 50%.  A similar step is required again this year, otherwise cities and towns that have adopted the CPA will see a much lower state match in fiscal 2015.

The Governor approved section 242 of the fiscal 2015 state budget, to transfer one-half of the “consolidated net surplus” left over from fiscal 2014, up to $25 million, into the Community Preservation Trust Fund.  This is a very positive development.  However, the state’s final fiscal 2014 surplus level will not be determined until September or October, because it will still take several months before the state’s CPA match is determined.

GOVERNOR APPROVES NET SCHOOL SPENDING EQUITY PROVISIONS
The Governor signed section 260 of the fiscal 2015 budget to establish equity in calculating net school spending under Chapter 70 by allowing, at local option, all communities to count health insurance costs for retired school employees in fiscal years 2016 and beyond, phased in over 4 years, and allowing DESE to waive penalties in the meantime.  This important MMA-supported provision is needed because the current rule excludes these costs from net school spending in some districts, but allows the costs to count in others.  Communities that have been prohibited from counting retiree health costs in net school spending have been forced to reduce spending municipal services or raise property taxes to make up the difference.

GOVERNOR RE-ESTABLISHES THE FOUNDATION BUDGET REVIEW COMMISSION
The Legislature’s final budget (in sections 124 and 278) included an MMA-backed provision to re-establish the Foundation Budget Review Commission in order to examine the adequacy of Chapter 70 funding, and the Governor signed these provisions this morning.  The foundation budget school spending standard that guides Chapter 70 funding was first enacted as part of the landmark 1993 education reform law and has largely remained unchanged since that time.  In addition to the need to adjust the foundation budget to reflect the many substantial changes that have occurred in public education over the past 20 years, the current foundation budget structure clearly understates many key education expenses, and does not fully reflect the cost of operating modern school systems, as evidenced by the fact that cities and towns spend $2.1 billion more to run their schools than the amount called for in the foundation budget, and a majority of districts are slated to only receive less-than-adequate minimum aid increases in the future.  This language will provide a much-needed review of the foundation budget framework, and includes municipal representation in the process.   
 
FINAL BUDGET UNDERFUNDS CHARTER SCHOOL AND McKINNEY-VENTO REIMBURSEMENTS
The final fiscal 2015 state budget plan underfunds the charter school reimbursement program and the McKinney-Vento homeless student transportation mandate.  The charter school reimbursement program will be fully funded in fiscal 2014, thanks to the recent $27.6 million supplemental budget that the Legislature passed several weeks ago.  However, the fiscal 2015 budget would provide only $80 million, which will create a $33 million shortfall that must be addressed in the very near future.  In addition, the final budget provides only $7.4 million for the McKinney-Vento requirement to transport homeless students back to their most recent school district, which is $7.5 million below the amount needed to fully fund this state mandate.  The MMA will continue to prioritize these programs and call for full funding this year in all supplemental budget proposals.

GOVERNOR SIGNS BUDGET PROVISION TO EXTEND A FREEZE ON RETIREE HEALTH CONTRIBUTION PERCENTAGES FOR THOSE COMMUNITIES THAT USED THE 2011 MUNI HEALTH REFORM LAW
As expected, the Governor approved sections 76 and 77 of the fiscal 2015 budget to extend the existing 3-year freeze on changing retiree health insurance contribution percentages by an additional 2 years, until July 1, 2016, for those communities that made plan design changes or joined the GIC under the 2011 municipal health reform law.  

Before today, any city or town that used sections 22 or 23 of Chapter 32B (the 2011 municipal health insurance reform law) to implement plan design changes or join the GIC was prohibited from changing retiree health insurance contribution percentages until July 1, 2014.  Sections 76 and 77 of the fiscal 2015 budget would unilaterally extend that freeze for two more years, until July 1, 2016, for any municipality that adopted or is planning on adopting provisions of the 2011 municipal health insurance reform.  Under this change, any community that has used or plans on using Chapter 32B to make plan design updates or join the GIC would be prohibited from changing retiree contribution percentages for two more years unless the municipality voted to change the contribution rate prior to May 1, 2014.  The provisions signed by the Governor would delay the ability of up to 70 communities to take action on retiree contribution percentages.

GOVERNOR APPROVES PROCUREMENT THRESHOLD RELIEF FOR CITIES AND TOWNS
The Governor approved increases in the thresholds for the use of competitive sealed bidding in the municipal procurement of good and services from $25,000 to $35,000 (in sections 61-66).  Below this threshold, cities and towns are required to solicit three written or oral quotes, or use sound business practices for the smallest procurements of less than $10,000.  It is important to make regular adjustments to the specific dollar amounts listed in state statute to keep pace with inflation, and help cities and towns save time and money for small procurements.

This is an article from EfficientGov.com –

Arbitration Decision Delays Cheshire Pension Move to 401k

in Finance, Pensions June 23, 2014