S&P Raises West Haven’s Bond Rating to A-, Assigns ‘Positive’ Outlook
From City of West Haven
WEST HAVEN, CT — For the second time in 10 months, S&P Global on Thursday, Nov. 7, raised its long-term credit rating for West Haven, sending the city from BBB+ to A- while assigning a "positive" outlook, Mayor Dorinda Borer announced.
Borer said she's thrilled about the A- rating upgrade, the highest in recent memory for West Haven.
"This is really positive news for West Haven and puts a stamp on the work everyone has been putting in to help move our city in the right direction," Borer said. "This global effort to help West Haven has included the members of the state Municipal Accountability Review Board, the state of Connecticut, and the dedication of our employees who understood the need to up our game and provide the good governance that our residents expect and deserve."
City Finance Director Michael Gormany said: "The upgrade reflects the work the Borer administration has done in a short amount of time. The upgrade and financial outlook demonstrates the positive strides in financial management, reporting and governance, including internal controls the city has made in a short period of time."
In addition to the rating upgrade in its analysis, the New York agency said the positive outlook "reflects the city's strong performance resulting in increases in available reserves and improved financial management practices. The outlook also reflects what we believe is a one-in-three chance that we could raise the rating if the city can continue its positive performance and fully address its internal control deficiencies and produce timely financial statements with no findings, while adhering to its management practices and policies."
In its eight-page report, S&P touted the leadership of the Borer administration, saying the city has taken positive steps to address the issues that have led to an increase in state oversight, including internal control issues, staffing shortages in the Finance Department and audit delays.
S&P said the city expects to complete fiscal year 2024 timely, which is a change to the challenge of completing audits on time in recent years.
"With a new administration as of January 2024, the city has taken several steps to cure the deficiencies highlighted in the fiscal 2023 audit and improve its internal control functions," S&P said. "This includes the hiring of several key financial management positions that were previously vacant, including a finance director, internal auditor, payroll manager, risk manager, and senior and junior accountants. It also hired two third-party consulting firms to help identify and address its internal control issues, which has led the city to make various changes in its procedures and institute new policies including bank reconciliation, audit trail reporting, and payroll segregation of duties.
"We understand management has also implemented formal weekly meetings with department heads (including the school department), filled positions in various board and commissions, improved employee training, and strengthened its IT protections."
Borer said she believes the latter comment reflects her delivering on a promise to improve both internal and external communications for smoother performance and transparency.
S&P also noted in its analysis that the city has ended fiscal 2024 with an estimated general fund surplus of about $5.9 million due to higher-than-estimated revenues and lower-than-budgeted expenditures in similar areas as fiscal 2023.
To boost the local economy, S&P said the city is seeking to generate economic activity "through opportunity zones and transit-oriented planning and zoning regulations" while leveraging renewed participation in the South Central Regional Council of Governments.
The city is also seeking to streamline and speed up the building permitting process while allowing for online permitting. It continues to look for grant opportunities and is "actively looking to fill economic and grant writing employees to assist in this endeavor," the report said.
The new credit rating could bring the city a step closer to exiting financial oversight by the Municipal Accountability Review Board. Since 2018, the MARB has overseen West Haven, a financially distressed city. The board escalated its oversight in 2022 to Tier IV, the MARB's highest level of oversight.
"The rating reflects our view of West Haven's adoption and implementation of stronger financial management practices, coupled with improvement in internal controls after the city was placed on Tier IV designation under the state's Municipal Accountability Review Board (MARB) in 2022. These changes continue to have a direct effect on the city's improved financial position and budgeting practices."
While S&P credits the work of MARB as a contributing factor through the years, the agency acknowledges that being in a state review program weakens its overall rating.
"While we view the state's involvement in the city's finances as a stabilizing factor that should aid in producing positive financial results, this oversight, along with previous dependence on state funds to achieve balanced operations over the past few years, weakens our view of West Haven's management conditions."
S&P's view aligns with Borer's recent assertion that eventually leaving the MARB will assist West Haven in the long run with the overall perception and potential investments in West Haven.
In addition to financial, management and governance, another aspect of criteria that West Haven was rated on was environmental.
"Although rising sea levels and extreme weather events pose long-term risks for the city, we believe management continues to plan and implement resiliency efforts to help minimize them," the report said.
"I am pleased to see that the criteria includes the preparedness to addressing long-term risks related to climate and environmental challenges," Borer said. "The work that a municipality performs in this area demonstrates thoughtful planning and preparedness to protect residents and property. I'm very confident that this is an area where West Haven really shines, as we have been putting significant work to mitigating the risk of climate change and implementing adaptation measures, and it seems this was recognized."
