The city's recent sales of bonds and short-term notes drew bids suggesting strong investor confidence in Gloucester's finances, Mayor Sefatia Romeo Theken said and Chief Financial Officer John Dunn said.
Investors who buy bonds usually factor in ratings set by companies such as Standard & Poor's in deciding how much return they will demand. Before Gloucester went to market this past summer to raise about $9 million for a variety of projects, the agency reiterated its 'AA' rating for the issue. A rating of 'AA' is the second-highest Standard & Poor's confers and indicates that the firm's analysts have concluded an issuer has a "very strong" capacity to pay its debts.
The city also sold short-term notes to serve essentially as a bridge loan pending other funding and Standard & Poor's gave the issue its top rating.
Bonds essentially are loans to entities such as municipal governments. The recent Gloucester bonds were "general obligation" bonds, meaning the resources of the city as a whole can be used — essentially serve as collateral.
The rating and the low interest rates the city will have to pay investors resulted from five years of work to shore up the city's finances, Romeo Theken said in a prepared statement. "I am proud that our hard work has resulted in these great interest rates that will save taxpayers’ money."
Dunn added: “The city’s strong financial condition, recent history of positive annual operations and regular market access results in competitive bidding for our debt ... the city receives very significant budget relief from these low rates, particularly when extended over the twenty-year life of the bonds. Such budgetary savings can then be redirected to other city services that enhance quality of life for all residents."
The funds raised through the bond and short-term note sales are earmarked for purposes including school roof repairs, public works projects and planning for school consolidation for which the city will seek state reimbursement.