The Aaa Scam.
By Jim Conley • Mar 30th, 2007 • Email This Post to a Friend •
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Spend a few minutes on the sixth floor of Brookline Town Hall and you’re likely to hear that the Town’s Aaa bond rating is proof to the claim that Brookline town government is, in the words of its many mouthpieces, “Massachusetts’ best run municipality.”
But how do these ratings get determined? Well, Moody’s Investors Service, one of the leading credit advisors in the World, goes about it this way:
“Moody’s long-term municipal ratings measure the intrinsic ability and willingness of an entity to pay its debt service. In the investment grade categories, the municipal rating measures distance to distress – how likely an entity is to reach such a weakened financial condition that extraordinary support is needed in order to avert default.”
Translation: The risk of defaulting on credit - as is this the risk with anything - is a function of understanding how various factors perform over the time continuum. Or, it’s about trying to forecast how long a community can cover its debts. In the case of Brookline and its $14 billion total valuation, the answer is quite some time.
Now suppose that the Proposition 2.5 over-ride being ginned up by the Selectmen failed at the polls. It may be that the credit raters would see this as shortening the Town’s “distance to distress.” The credit rating might be downgraded, but not as a result of the vote itself. A failed over-ride measure would focus attention on a projected $20 million deficit in 2012.
And right now, the efforts by Town Administrator Richard Kelliher and the Selectmen to raise fees, hire less interns and scare people with a few police and fire cuts are setting up residents for a world of woe. Long term problems need to be dealt with today by scaling back non-essential services and reducing top heavy government…and by assuming that there is no additional revenue coming through an over-ride.
But that would require the talents of a Triple A team. And we don’t have one.
Jim Conley is publisher of On Brookline.
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When a large corporation with publicly traded shares has financial problems and cuts its spending by selling off portions of its business and reducing its employee-work force, Wall Street looks at this as a positive and the share price may increase; likewise as to bond ratings for such a corporation. It’s called facing financial facts. Why can’t this work for Brookline?
The “Aaa Scam” for the override could convert into a mighty community scream, the “Aaaaaaaaaaaa-h!” to be heard throughout our Town. I propose the “Brookline Tea Party” on the Muddy River as a form of protest.
Mr. Kelliher’s political manipulations are detrimental not only because they misrepresent the true condition of the town’s finances. There is no crisis — foregoing or postponing the expensive renovation of town hall would eliminate the budget deficit.
Kellier’s scare tactics are damaging because they also exact immediate costs in the form of lower morale among teachers, parents of school children, and firefighters.
Politicos know that Kelliher’s proposed cuts to the school budget and essential town services are just a ploy to win a proposition 2.5 override so town government can have more money for its own special agendas (development, overbuilding, etc.).
But, school teachers and third graders should not be subjected to hardball politics. The mood at the schools right now is morose and Kelliher is to blame.