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Economics Government New Castle County News

Middletown bond rating upgraded by Moody’s

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MIDDLETOWN — Moody’s Investor Service has upgraded its bond rating for $32.8 million in outstanding debt for Middletown, citing the town’s continuous annual growth and strong conservative practices to shore up its reserves.

Moody’s upgraded Middletown from A1 to Aa3, which is four steps from the highest-ranking bond rating a municipality can achieve. Moody’s cited positive annual growth for a tax base valued at $761 million, with a five-year average annual growth of 3.1%, according to the report Moody’s issued in early June.

The news was heralded by Mayor Kenneth Branner, thanking the Middletown staff and the council for their hard work in improving the town’s financial standing.

“Without them, we certainly wouldn’t be able to complete all the projects we have. We never missed a beat this entire year, even though I know a lot of you have been inconvenienced,” Branner said on June 7. “Especially thanks to the mayor and council, for sticking to the budget process we have since it totally reflects in the bond rating.”

Bond ratings carry heavy weight because higher grades translate into lower interest costs in repayment of the bonds. Rating agencies look at a variety of criteria, including a state’s economy, government’s financial performance and management, debt load, long-term costs, and political structure.

Municipalities and states which analysts believe could withstand recessions or economic downturns are awarded higher ratings and seen as safer risks.

Moody upgraded Middletown from A1 to A2 in April 2017, and the town has maintained a S&P Global Ratings of AA-, three steps from the highest rating possible, with a stable outlook. The S&P Global Rating was affirmed last year as part of the town’s general obligation issuance. S&P upgraded Middletown from A+ to AA- in 2016.

Branner noted that since New Castle County has not re-assessed property values since 1983, it is possible for Middletown’s assessed value to be one-third of the estimated market value, which would be a tremendous gain.

Middletown ended Fiscal Year 2020 with an increase in its general fund balance, bringing available reserves to $6.7 million and a 32.4% increase in revenue. The current reserve level marks a six-year high for the town, and Moody’s pointed to repeated positive numbers on the balance sheet year over year.

Combining the town’s reserves in its capital projects fund, which includes impact fees collected from development projects, Middletown’s reserve position increases to $28.7 million, reflecting a 112% increase in revenues.

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