West Haven, Connecticut, gets boost as Moody's revises outlook to stable
West Haven, operating under a Connecticut oversight panel, received a boost from a rating agency as Moody's Investors Service revised its outlook on the city to stable from negative.
Moody’s, which affirmed its Baa3 rating – just above junk – on the city’s general obligation unlimited tax bonds, cited West Haven’s stabilizing financial position and the effectiveness of the state’s Municipal Accountability Review Board.
“The stable outlook reflects our expectation that West Haven, under the supervision of the MARB, will adhere to its five-year recovery plan and continue to make incremental progress towards structural balance and building fund balance over the outlook period,” Moody’s said in a statement on Tuesday.
A message seeking comment was left with Mayor Nancy Rossi.
After years of budget deficits, the loss of manufacturing business and internal bickering, 55,000-population West Haven landed on the radar of the nascent review board in November 2017 when the city issued $16.1 million of deficit-reduction bonds, which still left it $1.4 million short for fiscal 2017.
MARB last November approved the city’s five-year plan, which included $16 million in state recovery funds. S&P Global Ratings, which rates West Haven BBB with a stable outlook, said at the time that West Haven’s credit quality hinges on how well it executes the plan.
The rating, Moody’s said, also reflects progress towards structural balance despite the city's reliance on non-recurring MARB restructuring funds. The rating additionally incorporates the city's expanding grand-list valuations, elevated leverage and resident wealth and incomes that, while average relative to the nation, are below average for the state.
Connecticut's General Assembly created the 11-member MARB when it passed its fiscal 2018 budget. The lone municipalities under its watch, West Haven and state capital Hartford, are in Tier III under a categorization system.
Tier III status enables MARB to approve city budgets, a five-year recovery plan, labor contracts and provide feedback on bond issuance. Tier IV, the strictest oversight, would expand the board's role, including tighter budgetary control and the ability to appoint a financial manager.
Material progress towards structural balance, elimination of reliance on non-recurring revenues or material growth to the city’s fund balance position could lead to an upgrade, Moody’s said.
The following, according to Moody’s, could lead to a downgrade: Deeper structural imbalance from not adhering to its five-year plan; significant local resistance to balancing revenues with expenditures, suggesting a potential return to structural imbalance following the oversight period; deterioration of fund balance or cash positions; or material growth of debt and or/pension burdens.
West Haven held a public hearing Monday on proposed changes to the city charter that would put a city manager in charge and reduce the mayor to a part-time position. It would also establish minimum professional requirements for department heads.
Any recommendations from the City Council would go to a referendum.