CROMWELL, Conn. — Town officials are celebrating an “historically low rate” on bonds that were sold to pay for the construction of the new Public Works/Water Pollution Control Authority complex.
The town went to market recently on $6.94 million in bonds to finance the facility, which will be built on a 13.5-acre piece of town-owned land off County Line Road.
The action resulted in a 2.6% interest over the life of the bonds.
Valour Memorial Green, part of Cromwell, Conn.’s Main Street Historic District.
“Three key factors” led to the low rate, Director of Finance Marianne Sylvester said in a statement.
“First, the strength of Cromwell’s Triple A bond rating,” which was awarded to the town in 2014 by Standard & Poor’s, one of the three bond-rating agencies. The rating was re-affirmed May 6, according to the town.
“Despite the headwinds created by the on-going fiscal concerns at the state level, Cromwell continues to out-perform, maintaining stability and predictability in its finances while making critical investments in infrastructure,” Sylvester said.
Sylvester worked on the sale with John Healey, the managing director of Mesirow Financial, the town’s underwriter.
Healy explained the two other factors that helped created what he said was “overwhelming interests from investors” and in turn yielded the historic rate.
“There’s a thin bond market nationally,” he said.
“Municipal debt issuance is substantially down from previous years, creating a strong appetite among investors for quality securities,” he said. “Demand was so strong that we were two or three times over-subscribed in nearly every maturity, which allowed us to drive interest rates lower.”
“Third, the recent turmoil in global markets was key,” Healey said. “The continuing talk of a trade war with China has roiled markets over the past weeks, creating a ‘flight to quality,’ meaning investors pull money out of equities and instead purchase securities that are considered ‘safe,’ such as municipal bonds.
“These three factors came together and enabled Cromwell to achieve a true interest cost of 2.6% . If you assume an annual rate of inflation of 2%, the cost of this financing to taxpayers over the life of the bonds is minimal,” Healey said.
“Whenever a town goes to the capital markets, there are always issues beyond their control that will impact the final result,” Town Manager Anthony J. Salvatore acknowledged.
“However, the one thing that is within our control is our strong Triple-A bond rating,” he said. “By budgeting conservatively, making investments in things like roads, schools, parks and town facilities — while keeping a healthy ‘rainy day fund’ — we have maintained a AAA rating from S&P since 2014.
“That rating allows us to issue debt at the lowest rates possible, saving taxpayers funds not just for this generation but for the next generation as well,” he said.
In addition to the bonding, which will cover the majority of the cost of the facility, the WPCA is paying the town 28% of the cost, or $2.7 million, Sylvester said.
The remainder of the cost will come from appropriation from the general fund.
With the financing in place, Salvatore said the town expects to break ground on the project “some time this summer.”