MMA webinar addresses municipal borrowing, bond ratings

The MMA hosted a webinar on municipal bond ratings on Aug. 18 featuring Kristy Tofuri, a managing director at the Boston office of HilltopSecurities, an investment banking firm that serves as an advisor to cities and towns among other clients.

Tofuri outlined the municipal borrowing process and the key players involved, and gave an overview of how bond ratings work and why they’re critical for a municipality’s fiscal health.

Tofuri said the borrowing process begins when an issuer identifies a capital project, progresses through local authorization and legal drafting, moves to financial determinations and evaluations, and concludes with the bond sale, settlement, and ongoing debt payments.

Credit ratings influence a municipality’s borrowing costs.

“The stronger the credit rating, or better the credit rating, the lower the yields are,” Tofuri said. “The investor is willing to accept a lower rate on your bonds, because on the surface they are seen as a safer investment.”

She said credit rating agencies, such as Moody’s, Fitch Ratings, and S&P Global Ratings, evaluate each municipality based on: economy and institutional framework, management, finances, and debt and contingent liabilities.

Improving the management score is the best way to strengthen a credit rating, she said. To achieve this, Tofuri suggests establishing and adhering to policies, as well as regular reporting, financial forecasting, and capital planning.

Arlington Finance Committee member Allan Tosti moderated 20 minutes of questions and answers, addressing inquiries regarding the correlation between municipal reserves and its bond rating, how often financial policies should be updated, and what to do when a project doesn’t move forward.
• View the webinar