Bond rating boosted; Good news from Moody's.

Byline: M. Elizabeth Roman

LEOMINSTER - Moody's Investors Service upgraded the city's long-term general obligation bond rating to A1 from A2, affecting $16.5 million of outstanding debt.

The rating, signifying low risk of default, will save the taxpayers a significant amount of money on interest charges on debt for the library project, water system improvements and school renovation.

Moody's highest rated bonds are AAA. It also rates bonds with "very low credit risk" at AA. The A1 rating is the highest rating for bonds that are considered "low risk."

"This is a real credit to the financial team, and bodes well for the community and its future," said Robert Salvatelli, city councilor and Finance Committee member. "I was thrilled that they recognized our moderate growth and that it is sustaining itself."

He said that before the report he was not confident about the city's future in some areas.

"But now I can see we are going to be in great shape," he said. "We are under the levy, we have money in the bank and it looks like growth will continue at a moderate rate, which brings in more income."

The favorable rating for Leominster's bonds contrasts with Fitchburg. In March, Standard & Poor's, which uses a different rating system from Moody's, downgraded Fitchburg's bond rating to BBB-, or one step above junk bond status.

For Leominster, the upgrade to A1 reflects the city's favorable history of access to capital markets as well as its underlying credit factors, analysts wrote.

The report also cited the city's "three years of operating surpluses while maintaining significant excess levy capacity and a strong financial management team."

The city's sizable and moderately growing tax base and low debt burden also contributed to the favorable rating. The report cited the city's ability to collect "a strong 100 percent of the net levy."

"You don't just get there, you have to stay there," Mayor Dean J. Mazzarella said yesterday.

He also thanked taxpayers for their patience with the process and the difficult decisions that had to be made.

"We've stuck to the planning and tried not to get out of control with spending," Mr. Mazzarella said.

This is a significant move," John J. Richard, city comptroller, said. "We were able to execute a plan to increase the financial condition in the city."

Mr. Richard said the city also is planning to fully fund retirement insurance plans by 2015, which is ahead of the regulatory requirement of 2028.

Building the city's financial reserves has a positive effect on the overall fiscal health of the city, he said.

"We rely heavily on state aid. Reserves allow us to be more resilient to changes," he said.

David R. Laplante, collector and treasurer, said the city received six high competitive bids for its recent borrowing of $12.96 million in bond anticipation notes. He said the winning bid issued the notes at 3.722 percent.

"It was the first time in 15 years I received three calls from agencies," Mr. Laplante said, regarding the increased interest from lenders wanting to work with the city. "They see we are well-managed and taking care of business."

Moody's analysts believed the city will maintain a healthy financial position with significant flexibility.

Despite a decline in residential values, ongoing commercial development has enhanced the city's ability to continue to attract new development, the report said.

"I'm proud of the city and the elected officials for doing a great job," Mr. Salvatelli said. "It wasn't just one person. It was a team who do what's best for the city."

Leominster had a Moody's rating in the As in the early 1990s, but in 1992 Moody's dropped it to Baa1, where it stayed until 2001. That year the city's Moody's rating climbed back into the A pool, skipping over A3 to A2, where it remained until now.