Lenox's AAA credit rating will make for lower interest rates on borrowing for upcoming projects
LENOX — Credit ratings for towns don't get any better than this.
The Standard & Poor's agency has awarded a rating of "AAA" to Lenox, the highest possible category, as the town prepares to borrow about $7.6 million to fund two major capital improvement projects.
Great Barrington is the only other Berkshire County town to win top honors from S&P, which it achieved last spring, and no other community west of the Connecticut River has done as well.
The report from the ratings agency's Boston office, issued Sept. 1 following a recent site visit, stated: "We rate the town higher than the nation, because we believe Lenox can maintain better credit characteristics than the nation in a stress scenario."
Awarding of the stellar credit rating means the town will pay a lower interest rate in several weeks when it finances a combined $7.6 million in bonds toward the $3.8 million cost of the Richmond Mountain Road water line and repaving project as well as a $4.2 million wastewater pump station upgrade in Lenox Dale.
The town sought the rating from S&P, which is good for two years, just ahead of the financing for those projects, said Town Manager Christopher Ketchen.
"Cities and towns with higher credit ratings generally borrow at lower interest rates, just like people," he said.
Ketchen noted that two years ago, the Select Board adopted a set of five management goals. The first was to conduct financial planning aimed at securing a triple-A credit rating.
"This is the culmination of two years' effort to make sure the government was doing everything to justify it, so the residents, the government and the economy are supporting a top-level rating," Ketchen said.
Factors contributing to the town's firm financial footing include the ongoing expansion of the hospitality industry, the continuing "bedroom community" status for professional-level employees who work in other towns and cities such as Pittsfield, and the strength of the Lenox school system.
In its report, S&P cited the town's "strong economy and budget performance; very strong management, budgetary flexibility and liquidity," and low level of debt.
"The town is primarily a residential community that benefits from a seasonal economy with several resort spas composed of older large cottages and mansions, referred to as 'Great Estates,' that play a key role in the town's commercial base," the report stated.
"It is also the permanent summer residence for the Boston Symphony Orchestra and home to a 65-acre campus for Shakespeare & Company," it added. "The town also benefits from its outdoor recreational activities and facilities which attract visitors year-round."
Canyon Ranch, Cranwell Spa & Golf Resort and the Hillcrest Educational Center were listed among the largest yearround employers.
The report also emphasized renovations and expansions by "many of the town's estate resorts," specifically mentioning the proposed $60 million renovation at Cranwell, subject to zoning board approval, "which will see an expansion to the current business and is expected to attract more customers and tourists throughout the year."
Also praised by the S&P analysts were Town Hall financial practices, assessed as "strong, well-embedded, and likely sustainable."
During their recent site visit, the S&P analysts toured the town, stopping at Tanglewood, Canyon Ranch, Cranwell, the upcoming Lenox Manor hotel and event center project at the site of the Magnuson Hotel, the Courtyard by Marriott hotel under construction, The Mount and Shakespeare & Company, as well as the Lenox Dale industrial sector and the bustling downtown Lenox business district.
Given the town's reliance on lodging and meals as well as auto excise tax revenue to help hold down the rate of property tax increases, Ketchen commented that in case of an economic slowdown that affects tourism, the town has strong available reserves, including $3.3 million in so-called free cash, and plans its budgets conservatively.
In addition, surplus tourism taxes are used for capital improvement projects rather than town operations, he said.
The credit agency team also spent time at Town Hall, examining municipal finances through a presentation by Ketchen, Town Planner Gwen Miller, Town Accountant Charlie Brown, former Treasurer Andrea Wadsworth and new Treasurer Paula Downer. Schools Superintendent Timothy Lee discussed the assets of the school district.
In its "stable outlook" conclusion, Standard & Poor's commented on the town's "strong underlying economy" and predicted that "management will likely maintain very strong budgetary flexibility during the outlook period."
"We believe the town's historically strong financial performance and strong management conditions further support the rating," the report stated. "While not likely to occur, should the town's financial performance deteriorate leading to significant fund balance drawdowns, the rating could be lowered. Therefore, we do not expect to change the rating within the next two years."
Contact Clarence Fanto at 413-637-2551.
Report highlights ...
The Standard & Poor's rating agency included the following points in support of its top-level category awarded to the town:
• Conservative budget assumptions, a formal five-year, long-term financial plan and a five-year capital improvement plan that identifies funding sources.
• Strong budgetary performance, with slight surplus operating results in the general fund of 1.4 percent of expenditures, and surplus results across all governmental funds of 4.2 percent in fiscal 2015. Conservative budgeting led to savings in school costs and revenues coming in higher than anticipated.
• A $200,000 surplus for fiscal 2016, due to savings in snow and ice removal expenditures, as well as increases in its hotel, meals and motor vehicle excise taxes, which led to revenues coming in greater than expected.
• Tax collections remain strong and have averaged 98 percent over the past three years.
• The fiscal 2017 budget of $22.7 million represents an increase of less than 1 percent. The town consistently maintained available reserves at very strong levels. The town also adheres to its formal reserve policy of maintaining free cash and stabilization funds at a combined 7 percent minimum of expenditures.