Moody's Investors Service has downgraded to A3 from A2 the Town of West Boylston's (MA) general obligation bond rating, affecting $18 million in outstanding general obligation debt. Of the town's outstanding debt, $10.3 million is secured by the town's limited tax pledge, while the remaining $7.7 million carries the town's unlimited ad valorem tax pledge as voters have exempted debt service from the levy limits of Proposition 2 1/2. The downgrade reflects the town's diminished reserves evident in a fiscal 2008 available fund balance ending at 6% of General Fund revenues, down from 12% in fiscal 2005 (ended June 30) as well as a very slim $16,837 certified as free cash. The A3 rating additionally reflects the expectation that growth in the town's modestly sized $991 million tax base, located north of Worcester (G.O. rated A3), will be limited, with wealth and income indices that are slightly above average. Further, the rating also incorporates the town's currently low debt burden (1.0% overall debt burden) that is expected to remain manageable given the lack of future borrowing plans and an average amortization of outstanding debt (66.3% repaid within 10 years). All of the town's debt is fixed rate and the town is not party to any derivative agreements.
Moody's believes that West Boylston's financial flexibility has been weakened by state aid cuts, coupled with the historical appropriation of free cash to manage rising expenditures. In fiscal 2009, the town appropriated a total of $750,000 of free cash for operating purposes and year-end free cash was certified at $457,638, an improved but still modest 2.3% of unaudited revenues. Going forward in fiscal 2010, the town cut the equivalent of six full time positions from the town and school district, which along with expenditure cuts across the board helped to mitigate state aid reductions of approximately $250,000, or 6% compared to the previous year's level. Positively, no free cash was appropriated for operations and the town made transfers from free cash of over $74,000 and $100,000 to its Stabilization Fund and its Capital Fund, respectively, in November 2009 and remains in compliance with its policy to maintain no less than 5% of the current year's expenditure budget in its Stabilization Fund. Fiscal 2010 operations may be pressured by additional state aid reductions, although officials report that year-to-date expenditures are roughly $200,000 under budget. Future rating reviews will incorporate the town's ability to regain structural balance and increase and maintain satisfactory reserve levels through conservative budgeting practices.
STRENGTHS
-Limited, albeit growing, residential tax base with wealth and income levels above state and national medians
-Low debt burden expected to remain manageable due to absence of future debt plans
CHALLENGES
-Decreasing reserve levels, which have limited the town's financial flexibility
-Historical reliance on annual appropriations of free cash and other one-time sources of revenue
KEY STATISTICS:
2008 Population: 8,277 (+10.6% since 2000)
2009 Equalized Value: $991 million
2010 Equalized Value Per Capita: $119,747
1999 Per Capita Income (as % of MA and US): $22,899 (88.2% and 106.1%)
1999 Median Family Income (as % of MA and US): $69,100 (112.1% and 138.1%)
Direct Debt Burden: 1.0%
Payout of Principal (10 years): 66.3%
2008 General Fund Balance: $1.27 million (6.2% of General Fund revenue)
FY 2008 Stabilization Fund: $1.1 million (5.5% of General Fund revenue)
Long-term G.O. Debt Outstanding: $18 million
