WESTFIELD—The city’s financial health is still good after they recently received AA bond rating from Standard and Poors, according to Westfield Mayor Brian Sullivan.
The city received the AA bond rating from Standard and Poors this week, according to Sullivan, which is a system used to assess the city’s financial risk related to paying back bonds. The rating remains unchanged from its last review in February 2016, and the city has maintained the AA rating since 2014.
Westfield Mayor Brian Sullivan (WNG file photo)
“It’s a very good rating,” Sullivan said. “AA is financially sound and we’ve kept that even in the tough times over the past few years.”
According to Sullivan, the rating was in part due to the city’s management practices, which he said was cited in the report.
The rating, according to Westfield Treasurer-Collector Meghan Kane, can reflect upon interest rates that the city must pay back when bonds and notes—which are what bonds are made up of—are sold.
“The better the rating the more competition we will have when we sell notes and bonds,” Kane said, which she added would likely lead to a better interest rate for repayment.
She said that several financial institutions will bid on bonds from the city and provide interest rates. The city then chooses the bid.
“It’s the risk they see in the city, so AA is pretty low-risk investment,” Kane said.
However, Kane said that the rating could be higher.
The system has three tiers, A, AA and AAA, and the city could reach that third tier if there are certain improvements.
The chief improvement, according to Sullivan and Kane, would be related to the management of Other Post-Employment Benefits (OPEB), which is currently at $260 million.
The OPEB, according to Kane, is the health insurance benefits that are expected to be paid out for retired city employees. A portion of the total is what the city pays currently, in addition to estimation of what will be paid, Kane noted. This is found through formulations that include expected dates of retirement and how long benefits may be collected for.
“The one thing that they do talk about is the OPEB, that they are looking for a plan of action,” Sullivan said.
Sullivan noted that the city is addressing this, including his request last week to City Council for $100,000 from the “health insurance holiday” to be put toward the OPEB account. In addition, he said that in March 2018 he expects to request an additional $600,000 to go toward the account.
This addressing of OPEB is something that Sullivan said other cities and towns are starting to do nationwide.
“The focus has never been there before but the financial world is saying what if something happened, how would you handle that,” he said.
