Strong score means lower rates for Smithfield

Strong score means lower rates for Smithfield

SMITHFIELD – Smithfield’s S&P Global rating for bond issuance stayed the same through the coronavirus and heightened unemployment rates, said Town Manager Randy Rossi, which means lower interest rates on the upcoming school reconfiguration bonds.

Rossi explained the S&P rating as similar to getting a FICO score before getting a mortgage, and said it sets the foundation for interest rates. Smithfield scored “AA/Stable” in its long-term rating in preparation for bonding out $45 million for the nearly completed elementary school reconfiguration project.

S&P rates from AAA to D, with AA the second highest ranking. An AA rating means the town has a “very strong capacity to meet financial commitments,” while the B rating ranges between adequate to vulnerable, and a D means payment default on financial commitments or breach of promise.

Following the issuance of the school bond, Smithfield will have approximately $59 million in total direct debt, and will issue approximately $4.5 million within the next two years for the fire station project.

Rossi added that several older bonds will be paid off within the next three years, adding to the town’s strong S&P score.

Smithfield officials intend to go out to bond for the project by the end of September, with the S&P score likely bringing lower interest rates. He said lower rates will mean possibly lower bond payments for taxpayers. Rossi added that the elementary school project is on budget, not exceeding $45 million. He said the project is still completing punch list items, but will be ready for the return of students on Sept. 9.

“This puts things in a better place for the taxpayers of Smithfield,” he said.

“This has a direct impact on rates for when we go out to bond at the end of the month,” he added.

Combined with the lower score, Rossi said Smithfield will receive a reimbursement of 50 cents on the dollar from the Rhode Island Department of Education for the project. He said RIDE reimbursement will go directly toward bond payments.

For example, Rossi said, if bond payments are $2 million, the town will pay $1 million and the state will pay $1 million to the bonding agency. RIDE reimburses Smithfield 35 percent of school capital improvement projects, and Smithfield earned an extra 15 percent in reimbursements by adding elements providing energy efficiency, health and safety, and a project with fewer schools.

“This is still a substantial amount of money, but it is a good break,” Rossi said.

Long-term ratings reflect the S&P’s view of various factors in Smithfield, including if it has an adequate economy, strong management, adequate budgetary performance, strong budgetary flexibility, very strong liquidity, a strong institutional framework score, and a weak debt and contingency liability profile.

Rossi and other Smithfield department heads were interviewed for the updated S&P rating, which only occurs before a municipality goes out to bid, and lays out strengths and weaknesses.

He said the process is beneficial for the town.

“It lays out a picture of where we are and what it will take for us to get to the next level,” he said.