Hamden’s Outlook Revised From Stable To Positive: Fitch

HAMDEN, CT — Credit rating agency Fitch has revised Hamden’s ratings outlook from Stable to Positive, Mayor Lauren Garrett recently announced.

Fitch is an independent bond rating agency that evaluates the town’s budgets, audits, performance, economic drivers, and long-term liabilities to rate its debt and ability to repay investors.

“The Outlook revision to Positive reflects improvement toward a structurally balanced budget and significant improvement in the town's unrestricted reserve position due to a combination of asset sales and a series of debt service restructurings,” according to the analytical conclusion in Fitch’s news release. “Management has been successful in its efforts to increase the annual debt service budget in accordance with a long-term plan to restore reserves and projected fiscal 2023 net operating results are showing surplus results net of bond restructuring savings. Continued management of expenditures to align with changes in revenues and maintenance of unrestricted fund balance at levels in line with policy limits would support potential future upward rating movement.”

The “rating reflect[s] Hamden's recently improved financial resilience to more adequate levels and its reliance on savings from bond restructurings to help pay for future increases in scheduled debt service, while avoiding substantial property tax increases,” according to a news release. “Full funding of the pension ADC was accomplished in fiscal 2021 for the first time in years, which Fitch views as a positive.”

Fitch notes that Hamden has “relied upon one-time savings from bond refundings to help subsidize operations notwithstanding actions to control growth in certain recurring operating expenditures.”

“Hamden's negative financial position for fiscal 2020 worsened due to optimistic budget assumptions and declines in revenues due to the pandemic,” according to the news release. “Management raised revenues and imposed expenditure cuts the past few years and with use of federal grants and bond restructuring savings has rebuilt reserve levels and improved liquidity.”

In current developments, Fitch noted that with the issuance of the series 2023 refunding bonds, the town “will have completed its deficit mitigation and fund balance growth plan.”

“Through a series of bond restructurings which resulted in upfront savings and higher debt service in later years, the town was able to eliminate its negative fund balance position, build up its liquidity and reserve position, and gradually increase its ability to accommodate escalating debt service in its budget beginning in fiscal 2025,” the news release states. “With new management in place, the town's budget included less optimistic revenue assumptions and better expenses management contributing to more balanced operations projected in the current fiscal year. Fitch expects the town to continue a practice of adopting budgets with conservative or reasonable assumptions.”

Garrett said, “I am pleased that Fitch has recognized our efforts to improve policies and our fiscal discipline. Decades of mismanagement resulted in liabilities over $1 billion and a negative fund balance. This improved outlook will make Hamden more attractive to investors and the business community. I am committed to keeping us on the right track of continued fiscal discipline to build a thriving community for all of us.”

Read the full report from Fitch here.