Lower Merion Township Keeps Its AAA Bond Rating

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dmuth's picture
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I got this note from Lower Merion Township today:

Moody's Investors Service and Standard and Poor's have both reconfirmed Lower Merion Township's Triple A Bond Credit Rating, which is the highest rating attainable. Should municipal bond market conditions remain favorable, the Township plans to hold a competitive bond sale on April 4th to refinance approximately $12.1 million of its current outstanding bonds at overall lower interest rates. Potential budgetary debt savings are estimated at approximately $600,000.

Standard and Poor's assessment noted strong financial management, which has led to the maintenance of what the rating agency regards as "strong finances and very strong reserves." The rating agency called Lower Merion's financial management practices "strong" under its Financial Management Assessment methodology, indicating practices are strong, well embedded, and likely sustainable.

"Confirmation from both Moody's and Standard and Poor's that once again the Township's financial position attained the strongest of ratings is excellent news," said Dean Dortone, Chief Financial Officer. "As a result, we anticipate that many financial institutions will respond to our bond sale with very competitive interest rates."

Dortone coordinated presentations by Township financial advisor Public Financial Management (PFM), which included conference calls with Moody's and Standard and Poor's (S & P). "In awarding the Triple A, the rating agencies cited Township's deep and diverse property tax base, reflected in extremely strong per capita market values, strong financial management and moderate debt levels as a percent of market value," remarked Doug Cleland, Township Manager.

"Year after year, Lower Merion receives this very exclusive rating, and it is a credit to the day in and day out professionalism of the financial leadership of our Township," stated Board Vice-President Paul McElhaney, Chair of the Finance Committee.

Lower Merion Township is the only municipality in Pennsylvania and one of only five Townships in the United States with a Triple A credit rating from both of the largest rating agencies. Only Princeton Township, Bernards Township and Mendham Township in New Jersey and Bloomfield Township in Michigan share this distinction with Lower Merion. "Our healthy reserve levels, combined with the excellent management of the Township's finances and capital improvement program cannot be underestimated," added Board President Elizabeth Rogan.

Not just a noteworthy distinction, Township's double Triple A status allows it to borrow at the lowest possible interest rates the market will bear, translating to tangible savings for the Township.

I'm not a financial whiz, so I'm not sure if this is as good as it sounds, or the AAA designation from Standard and Poor is just a rubber stamp. I'd love to hear from folks who know this stuff better than I do.

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politeia's picture
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First of all, the timing of this press release is cover for the illegal and unauthorized pay that is all over the blogs and Main Line Times.

That puts into serious doubt (and beyond a doubt in my view) the credibility of Doug Cleland and management staff.

Secondly, the township has taxed us so much that they have at least $15 million in reserves they don't need for a AAA bond rating.

This stuff ain't rocket science. You sock away enough taxpayer money and you can get great rates on bonds, just like if you sock enough money away as an individual and pay your bills on time you can get a great rate on a mortgage compared to those with lesser credit and less money to put down on a house.

Given the wealth of the taxpayer-owners of this township, it is a no-brainer that LM should have a AAA bond rating.

As for saving $600,000, that is purely on the bond markets and cheaper rates. Township's with lower bond ratings can also refinance and save money. No different than refinancing your home mortgage for a lower rate and saving money on your monthly payments when mortgage rates go down. This is nothing special, though the township press release would have you think only the most brilliant and indispensable LMT employees could make this happen, when it is just a matter a making a call that is no different than calling a mortgage broker who will happily do all the legwork to refinance your mortgage to a lower dollar amount for a commission.

Finally, the difference between a AAA bond rating and a AA rating is negligible as the majority of a $12 million bond (loan taken out by the township) is principal and while the rate LM can get is a little better than AA, it is negligible in the big picture in regards to the overall amount of debt service.

And here we have the Township once again taking credit for what it can only accomplish due to the People of Lower Merion paying their taxes – and with the legwork done a by bond broker. I think most reading know to pick up the phone and call a mortgage broker to refinance when mortgage rates go down. That's all Cleland did here with a bond, and it is the least that should be expected of him and his enormous pay package and should not be made into some amazing feat.

All I can say is: arrogant, selfish, and greedy - what with the illegal, unauthorized and secret 457(b) contributions to management staff with our tax dollars that go into the millions upon millions of dollars in what I consider nothing short of theft-by-deception where township management staff enriches itself with a secret and unauthorized $300,000 a year of our tax dollars for picking up a phone and calling a municipal bond broker and essentially bragging about being able to dial that phone number while they laugh all the way to the bank with their secret pay with our tax dollars.

=================

Brotherhood of Thieves ~ As we must account for every idle word, so must we account for every idle silence.

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carla's picture
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Well let's see, Lower Merion is a bond issuer. They use issuer paid ratings agencies. So technically, Lower Merion gets what it pays for with Moodys and S&P. Meanwhile, Radnor is currently discussing some bond deal to refinance 2007 bonds and they are AA1 I think and their bankers are also waxing poetically about their rating....while their bond counsel is confusing the cr*p out of the commissioners...

Here's an interesting article on the basics of bonds:


The Basics Of Bonds
Tim Parker, provided by
Investopedia
Monday, March 26, 2012

The bond markets are a place often devoid of the retail or part time investor. It is often for professional investors, pension and hedge funds, and financial advisors, but that doesn't mean that part-time investors should steer clear of bonds. In fact, bonds play an increasingly important part in your portfolio as you age and, because of that, learning about them now makes good financial sense.

FWIW I am kind of with politeia on this - the timing is a rather convenient smokescreen of sorts - puffy press releases no matter how cleverly crafted can't completely detract from pressing issues in Lower Merion.

As for McElhiney and his comment "Year after year, Lower Merion receives this very exclusive rating, and it is a credit to the day in and day out professionalism of the financial leadership of our Township," --- eyes are rolllllling. First at the idea of him actually saying that and second LMT isn't the only AAA bond rating in the universe and finally again, Lower Merion is a bond issuer, they use issuer paid credit ratings agencies, so back again to they to an extent get what they pay for....

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"Well behaved women rarely make history" - Laurel Thatcher Ulrich

Hugh Gordon's picture
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The Township pays an extra $11,000 (I understand that is the number) so it can brag about having two, rather than just one, triple A rating and pretend that it is extra special.  Having two doesn't do anything meaningful.  Politeia is right -- this is one of the wealthiest communities in the world, and that simple fact makes for a good credit rating. 

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LMT Observer's picture
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From the Township email quoted in dmuth's opening post:

"Our healthy reserve levels, combined with the excellent management of the Township's finances and capital improvement program cannot be underestimated," added Board President Elizabeth Rogan.

What's that again, President Rogan?  You say that the excellent management of the Township's finances and capital improvement program cannot be underestimated.

At last.  You have started to recognize the merit in the arguments of some of your co-Commissioners and citizens who have been trying so hard and for so long to attend you and some of your other co-Commissioners to weaknesses in the Township's management of finances and the capital improvements programs.   

 

 

 

 

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