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Town wins low rate on $7M bond sale

Published 7:21 am, Wednesday, January 30, 2013
  • First Selectman Gordon Joseloff, Selectman Charles Haberstroh and Finance Director Gary Conrad discuss the town's new $6.99 million bond sale during a Board of Selectmen meeting at Town Hall. Tuesday, Jan. 29, 2013/ Westport, CT Photo: Paul Schott / Westport News
    First Selectman Gordon Joseloff, Selectman Charles Haberstroh and Finance Director Gary Conrad discuss the town's new $6.99 million bond sale during a Board of Selectmen meeting at Town Hall. Tuesday, Jan. 29, 2013/ Westport, CT Photo: Paul Schott

 

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By Paul Schott

Westport has secured one of the lowest interest rates in recent years for a municipal bond sale in Connecticut, as the Board of Selectmen unanimously approved a $6.99 million bond issue for the town's schools, sewer system and other municipal projects.

The town will pay an interest rate of approximately 1.91 percent, according to the winning bid from FTN Financial Capital Markets, a bank dealer and division of First Tennessee Bank. The bonds' principal will be paid off annually between 2014 and 2033.

Both First Selectman Gordon Joseloff and Selectman Charles Haberstroh voted Tuesday to approve FTN's bid. Selectwoman Shelly Kassen did not attend Tuesday's meeting.

"It is quite remarkable, the rate," Haberstroh said.

FTN was one of 10 bidders for the new bond sale -- twice the number of bids the town received for its last bond issue, which was held in 2009. Five of those bids proposed interest rates below 2 percent. Stifel, Nicolaus & Co. had the second-lowest bid with a proposed interest rate of about 1.93 percent, while UBS Financial Services came in third with an offered 1.94 percent interest rate. Among the 10 bidders, TD Securities proposed the highest interest rate, 2.6 percent.

Westport's low interest rate for its bonds correlates to the top-tier AAA rating the town received Jan. 24 from the credit rating agency, Moody's Investors Service, for the bond sale. Earning a AAA rating from Moody's comprises one of the most sought-after endorsements for municipal credit status.

The Moody's rating "reflects Westport's sizable tax base with extremely high wealth and income indices and a manageable debt position," Moody's said in a summary rating rationale. "The rating further incorporates the town's well-managed financial operations marked by adequate reserve levels, a well-funded pension system, and proactive funding of the town's post-retirement benefits liability."

A key town financial adviser agreed with Moody's assessment.

"The town's exceptionally strong credit, well-managed finances and so on, which led to a AAA rating, and based on the size of the issue and the knowledge that the underwriting community has of the town led us to a very successful sale here today," said Matthew Spoerndle, managing director of Phoenix Advisors LLC, which advises municipal, county, state governments and schools on financial management.

The 1.91 interest rate for the new bonds is markedly lower than the 3.56 percent interest rate assigned to town bonds totaling $12.5 million in 2009. In addition to the town's top rating from Moody's, the interest-rate plunge aligns with recent macroeconomic trends, Spoerndle said.

"A lot has changed in three years," Spoerndle said. "It seems every like six months or so, new lows [in interest rates] are reached. There's been a gradual trend downwards."

The 1.91 percent interest rate for the new bond sale compares favorably even to other notably low interest rates posted for similar municipal bond sales in the state in recent years, Spoerndle said. Wilton, for instance, held a $7.9 million bond sale in September 2012, which will be repaid over 20 years with a 1.97 percent interest rate. FTN also made the winning bid for that issuance, according to Spoerndle.

Moody's also "affirmed" the AAA rating on the town's outstanding $130 million in long-term general obligation debt, a total which does not include the new bond sale.

Other town officials also praised the interest rate secured for the newly issued bonds.

"Our conservative financial actions ... identified by Moody's as a primary strength, differentiate us from other towns as well as the state and nation," Board of Finance Chairman Avi Kaner said in an email Tuesday.

Board of Finance Vice Chairwoman Helen Garten, a potential candidate to succeed Joseloff as first selectman, expressed a similar viewpoint.

"It's a very favorable rate," she said in an email Tuesday. "Once again, our Finance Department and financial advisers did an outstanding job."

The town's next bond sale will probably be held in 2014, Finance Director Gary Conrad told the Westport News.

FTN will serve as the broker or "middle-man" for the bonds, with most of them likely to end up in funds run by asset-management firms such as Vanguard and Dreyfus, according to Spoerndle. Asked by Joseloff about the possibility of Westport residents buying some of those bonds, Spoerndle responded that "it's difficult, because these firms have the majority of these bonds spoken for before they put their bids in."

Spoerndle advised interested town residents to consult with a financial planner or broker to find out if they might be able to acquire some of the town's bonds in a secondary market.

pschott@bcnnew.com; 203-255-4561, ext. 118; twitter.com/paulschott