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Village of Croton-on-Hudson Gets Top Bond Rating from Moody's

July 20, 2006

Croton-on-Hudson once again has been assigned the top debt rating for a village of its size and demographic characteristics by Moody’s Investor Services. This was pointed out by Village Treasurer Abe Zambrano at the July 10, 2006 regularly scheduled Village Board meeting (see video clip and transcript below) at which Mr. Zambrano called attention to the recent issuance by the village of $2.27 million of Public Improvement Bonds. Additionally, Croton has $12.11 million of outstanding parity debt that has also been reaffirmed with an “A1” rating.

Issuance of these types of debt instruments is a regular practice of the village, and other municipalities, to meet certain recurring financial obligations and to take advantage of the now-ending low interest rate environment that the economy has enjoyed.

Croton has had an Aaa or A1 rating on its general obligation and/or public improvement bonds since 1998—the earliest date from which Moody’s has been tracking the village’s debt. Since 1998, Croton has issued GO bonds every year except for 2001 with maturities ranging from 10 to 20 years. Thanks to the fiscally conservative nature of Croton’s borrowing practices established many years ago, its stable tax base and the ability to meet interest obligations on the outstanding and new debt; it is not surprising that the village has enjoyed this rating for a number of years.

Despite Mayor Dr. Gregory Schmidt’s statement, “…just as a quick, whatever, you [Treasurer Zambrano] did point out that last year we did very well, and that was with a bunch of amateurs who ran the village last year, so I just wanted to point out that the amateurs did okay last year contrary to popular belief…” about the latest “A1” rating by Moody’s, the fiscal conservatism that led to this reaffirmation of the village’s debt rating was not a result of his supervision.

Rather, the favorable Moody’s rating is a product of the village’s long-established practice of managing its financial position through its Village Manager’s Office and the Village Finance Department. With all due respect to Mayor Dr. Gregory Schmidt, it is Manager Herbek, Treasurer Zambrano and the village staff who deserve credit for continuing to manage village finances in a responsible and conservative manner.

Video clip:

Download this video clip to your video iPod (how to guide).

Video transcript:

Treasurer Abe Zambrano: “Actually, I just have a couple of things. One is that we’ve got taxes due by June 30th wich was actually the Friday before last. We did ah, the collections were relatively ah, ah, pretty good um and timely for the most part and those that are still paying pretty much you know same as prior years. Ah, water bills are due by July 15th so those of you that haven’t paid yet please try to avoid the late penalties by paying by the 15th of July.

And the last item that we have, I have actually is on July 5th we issued a bond for the ah, ah, financing of last years projects and we were actually rated by Moody’s at an A-1 rating and it’s basically the highest rating that a village our size can achieve. And I had sent a copy to the board for your review and ah the information is pretty much basically the village was able to reach that rating because of ah, pretty much the way that we manage our finances um. Among other things, one of the things that they do mention is the fact that ah, we have a very manageable debt burden and that is probably one of the biggest um, factors that the rating agencies take into account. Um, and of course the fact that ah, we do have a um, I say we do budget conservatively and we do pretty well on the revenues on a yearly basis. Um, that’s basically it.”

Mayor Dr. Gregory Schmidt: “Thank you Mr. Zambrano that’s a very good report for the village that we are doing so well, of course with an awful lot of your hard work to make sure that we are um, kept on our toes—“

Treasurer Abe Zambrano: “And the staff—“

Mayor Dr. Gregory Schmidt: “And the staffs. Exactly. When I say you, I include your entire staff. It is your entire department that does a great job down there—“

Treasurer Abe Zambrano: “Thank you.”

Mayor Dr. Gregory Schmidt: “I really, you know, provide a really wonderful service to this village—“

Treasurer Abe Zambrano: “Thank you.”

Mayor Dr. Gregory Schmidt: “So, again, I thank you on that and I also thank the board for being so responsive for making sure that we don’t spend money and just as a quick, whatever, you did point out that last year we did very well and that was with a bunch of amateurs who ran the village last year so I just wanted to point out that the amateurs did okay last year—contrary to popular belief.”

On July 22, 2006 10:51 PM, Tom Faranda said:

I didn’t say there was any inconsistency, although I suppose I could have. I said I was confused.

Nowhere in your posting or the transcript was it mentioned that the village bonds are insured, which from an investor viewpoint, means it is Aaa rated.

Had your original posting contained the info you put into your comment, it would have been much clearer.

Having a stand alone A1 rating is fair dinkum.

As an aside, while municipal insurance can increase marketability, there is an insurance premium that must be paid - usually by the issuer of the bond - which can nullify some or all of the financial advantages you mention in your comment. Perhaps that’s why the village didn’t insure the 2002 paper. Maybe it was not cost effective.

On July 21, 2006 4:15 PM, TeaDrinker said:

There was no inconsistency in our editorial.

A1 is the village’s underlying bond rating. It is the 5th highest level but the highest level available to an issuer of the village’s size.

The village has its debt insured by XL Capital Assurance Inc., MBIA Insurance Corp., or Financial Security Assurance, Inc.

All three insurers have Aaa ratings with all of the rating services which is why a small borrower like the Village of Croton-on-Hudson gets a bump up in their rating when they opt to insure the bonds.

This insurance bumps the village’s credit rating up to Aaa. The purpose of insuring the bonds is to improve marketability of them to the capital markets and to lower the borrowing costs and interest rates to the issuer of the bonds.

These insurance companies also guarantee payment of interest and principal. The Village of Croton-on-Hudson actually has insured all of its debt since 1998 except for 1.58 million in 2002.

We have been unsuccessful in discovering the reason the why village did not obtain insurance for the bond in 2002.

On July 21, 2006 1:11 PM, Tom Faranda said:

I’m a little confused here.

First you say Croton got the top bond rating for it’s size and demographics.

Then that our outstanding debt is A1 (the fifth best Moody’s rating, but still an investment grade rating).

Then we have Aaa or A1 on outstanding debt since rating began in 1998.

Then that the latest rating is A1, and that’s mentioned by the treasurer in the transcript.

Which is it? Are our GO bonds Aaa or A1?

On July 20, 2006 9:23 PM, Mrs. Smith said:

From Schmidt’s comments, it is obvious that he has yet to grasp the council/manager form of government that has run our village so efficiently for many years. This rating has nothing to do with “the bunch of amateurs who ran the village last year”.
Every time Schmidt has run for office, he has run on a platform of non-negotiation with Metro-Enviro and, the debt burden of the village. It just goes to show that, like the national Republicans, if you repeat falsehoods often enough, people begin to believe you. Let’s bring back responsible, thoughtful government in 2007 - government that has the best interests of the village residents in mind.


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