By EKATERINE TCHELIDZE
Chronicle Staff Writer
COVENTRY â€” Coventry didn't wrap up the calendar year with good news like everyone might have hoped.
That's because Moody's Investor Service, the bond credit rating agency out of New York, downgraded Coventry's bond rating.
The news came in last month when the information became public.
â€śDespite strong management and a history of stable finances, the Town of Coventry faces increased pressure from holdbacks and declines in state funding and exposure to a significantly underfunded state teachers' pension plan,â€ť the agency said in a report. â€śTown reserves are low compared to the national medians.â€ť
These challenges were the reason for the downgrade, which saw the rating go from what Moodyâ€™s classifies as â€śAa2â€ť to â€śAa3.â€ť
A townâ€™s bond rating is key because a healthier bond rating translates into better municipal borrowing power and lower interest rates.
Coventry Town Manager John Elsesser said the downgrade will cause higher interest rates for the town.
Elsesser said the town has a list of potential borrowing needs, which include the Booth & Dimock Memorial Library expansion project that the town is reconsidering after taxpayers voted it down in November.
Some other needs include several school repair projects and the Jones Crossing Bridge that needs to be fixed due to a crumbling concrete problem.
â€śTiming on all of them and total amounts are up in the air, but we know they will be coming in over the next several years,â€ť Elsesser said.
And it will take some time to bring the bond ratings to the level where they were.
Elsesser said to get a higher bond rating restored in Coventry, the state should be in a stable financial situation.
The two major items that were concerning to Moody's were possible transfer of the teachers' pension cost and losses in revenue, which is about $1 million for Coventry.
â€śTo counter that, we will need to increase our fund balance by several percentage points which is extremely difficult when the state keeps cutting town aid even after the budget was adopted,â€ť Elsesser said.
Gov. Dannel P. Malloy said in November the state will implement a â€śholdbackâ€ť on municipalities â€” after the state budget was finalized.
This means Coventry is in danger of loosing additional $732,805 in revenues from the state.
â€śThe downgrade reflects the town's elevated exposure to the State of Connecticut and below-average reserve position,â€ť according to a press release.
The release said some of the factors that can lead to an upgrade of bond ratings are improvement in reserve funds, tax base expansion and reduced reliance on state funding.
Coventry Town Council Chairman Joan Lewis said this downgrade â€śis a concern,â€ť but â€śthe state legislators need to put politics aside and address the problem.â€ť
But despite the challenges, Lewis said â€śthe town is doing the things it needs to do.â€ť
Lewis said the town will have to increase its fund balance while trying to meet the losses the town is sustaining along with trying maintain the infrastructure.
â€śWe have to keep looking to the future, be prudent with our spending and do what we can,â€ť Lewis said. â€śWe also have to protect our taxpayers from huge increases.â€ť