Hamden's Credit Rating Downgraded By Moody's

HAMDEN, CT — Moody's Investors Service once again downgraded Hamden's bond rating. It's new rating is Baa3 from Baa2 and Moody's outlook remains negative for the city's foreseeable financial future.

"The downgrade to Baa3 reflects the town's very narrow financial position, which will remain challenged in coming years due to a high equalized tax rate and high, and rising, fixed costs," Moody's said in its analysis. "The town's long-term liabilities are high, largely due to years of under-funding pension liabilities, including in fiscal 2019."

The ratings function much like a consumer's credit rating. Generally higher ratings come with lower borrowing interest rates as the risk of defaulting on loans is lower.

Baa3 is Moody's lowest investment grade bond rating. Anything below that Moody's considers more of a speculative investment that carries more default risk.

Moody's warned that not fully funding pension contributions in fiscal year 2021 could lead to another rating downgrade. It also noted that Hamden's low reserve fund could make it difficult for the town to handle a large unexpected expense.

The downgrade brings Hamden's credit rating into the bottom three of towns in Connecticut. West Haven also has a Baa3 rating and Hartford has an even worse rating at B1, according to the New Haven Independent.

Both West Haven and Hartford are under oversight from the Connecticut Municipal Accountability Review Board.

Leng told the New Haven Independent that the downgrade was disappointing, but not unexpected. The town awaits its 2019 audit results and its expected pension actuarial contribution, which would be the amount Hamden would have to pay into its pension fund in order to consider it a fully-funded payment.

Moody's noted that making a fully-funded payment could lead to a more positive financial outlook.