Moody's Investors Service said it has assigned an A3 rating to the town of Hamden, Conn.'s $29.3 million general obligation refunding bonds, issue of 2013, and downgraded to A3 from A2 the rating on $146.3 million of outstanding parity debt.
The bonds are secured by the town's general obligation, unlimited tax pledge. Proceeds from this issue will be used to refund various maturities of the town's 2003, 2005A, 2006, 2011A, and 2012 bonds for a net present value savings of approximately 3.6% of refunded principal.
The refunding will restructure the town's existing debt schedule, and will result in the majority of the savings being recognized in fiscal 2015, 2016, and 2017.
Although the refunding will result in an overall net present value savings, the restructuring will result in a loss of approximately $1.1 million annually from fiscal 2018 to 2027.
The A3 rating reflects the town's very narrow financial position, a severely underfunded pension system and rolling deficits in the internal service fund. The rating also incorporates the town's sizable, mature tax base and a moderate debt burden.
The negative outlook incorporates Moody's expectation that the town will remain challenged to restore fiscal stability in the near term, given the limited revenue flexibility and competing demands for expenditures.
Further, the outlook incorporates the uncertainty regarding the future of the town's severely underfunded pension system, and the town's ability to return to full funding of the actuarially required contribution.