Moody's Upgrades Town of Gray Rating

The Town of Gray is pleased to report that on June 2, 2017, Moody's Investors Service upgraded the Town of Gray, ME’s outstanding general obligation debt from an Aa3 rating to an Aa2.  Concurrently, Moody’s has also assigned an Aa2 rating to the $2.7 million 2017 General Obligation Refunding Bonds (recommended by the Treasurer and the Finance Committee to the Town Council, and officially authorized by the Town Council on May 2, 2017 (Order #120-17)). 

According to Moody’s Rating action statement, the upgrade to Aa2 rating reflects a “well-managed financial position with healthy general fund reserve levels that have improved over the past four years.”  The rating also incorporates the “small tax base with above average income levels, limited debt burden with no future long-term borrowing plans, and no pension and OPEB liabilities”.

During the bond refinancing process, Standard & Poors (“S&P”) provides rating information as well.  On June 2, 2017, S&P Global Ratings “assigned its 'AA+' rating and stable outlook to Gray, Maine's series 2017 general obligation (GO) refunding bonds and affirmed its 'AA+' rating, with a stable outlook, on the town's existing GO debt.

The rating reflects S&P's opinion of Gray's:

• Strong economy, with access to a broad and diverse metropolitan statistical area (MSA);
• Strong management, with good financial policies and practices under our Financial Management Assessment (FMA) methodology;
• Strong budgetary performance, with an operating surplus in the general fund and break-even operating results at the total-governmental-fund level in fiscal 2016;
• Very strong budgetary flexibility, with an available fund balance in fiscal 2016 of 25% of operating expenditures;
• Very strong liquidity, with total government available cash at 39.5% of total-governmental-fund expenditures and 6.3x governmental debt service, and access to external liquidity we consider strong;
• Very strong debt-and-contingent-liability position, with debt service carrying charges at 6.3% of expenditures and net direct debt that is 37% of total-governmental-fund revenue, as well as low overall net debt at less than 3% of market value and rapid amortization, with 83.2% of debt scheduled to be retired within 10 years; and
• Strong institutional framework score.”

The upgraded rating from Moody’s as well as the strongly affirmed rating from S&P helped put the Town of Gray in a good position to refund municipal bonds at a better rate, creating an approximate savings of $192,000, which will reduce the debt service payment for those General Obligation Bonds (at varying amounts to that approximate total) over the next 10 fiscal years.

The Town Manager would especially like to recognize Finance Director, Cathy Markavich, for her authorship and diligent management of the Town of Gray Capital Improvement Plan, Debt Management Policy, and Investment Policy as well as her work on the 2014 Town Charter amendment, all of which were instrumental in achieving the upgrade in the Moody's rating.