They Said What!!

So, what happened to cause the change from A+ Stable of August 2009 to AA-/Stable in November of 2011? And who cares anyway?

I have already confessed, many times, that I was not the brightest student in Algebra or in any other class requiring the calculation of numbers whose end result might make some sense.

So, I would really like someone to enlighten me as to how the mayor could announce in September on a "... Thursday that he is laying off his office administrator as part of an effort to trim a possible $1.26 million from the 2012-13 budget." then announce on a Friday in November "...that money was found in the Finance Department’s budget to fund her $52,000-a-year position through the fiscal year..." and THEN assure Fitch Ratings that "... "...further expenditure cuts, including additional staff reductions, can be made if necessary to help maintain balanced operations."

I understand that the amount needed to pay the mayor's administrator is only a drop in the proverbial bucket but that continuing trickling has certainly gone a long way in draining New London's financial bucket.

As if things were not bad enough and seemingly getting worse with every mayoral press release, we now read in Paul Choiniere blog that “New London's financial struggles have gotten the attention of a credit rating agency responsible for evaluating its ability to pay off loans on time. Fitch Ratings recently informed the administration that the city's AA- rating for general obligation bonds, which dropped a notch last March, is in peril of sinking further. Fitch now lists New London's rating outlook as negative.”

While I can’t argue with that (well actually I can but it would just be arguing for argument’s sake) there are a number of things that Choiniere neglects to mention such as while Fitch's is one of the three top credit rating agencies it is the smallest of the three with Standard & Poor and Moody’s holding the top spots and both of them have different things to say about our city.

For example, Standard & Poor , the largest of the three, on August 21, 2009 gave the city of New London an A+ Stable rating with a STABLE outlook until November 30, 2011 at which time New London’s rating changed to AA-/Stable on November 30, 2011.

So, what happened to cause the change from A+ Stable of August 2009 to AA-/Stable in November of 2011?

Sadly, I’m not smart enough, at least in that area, to figure it out. The only event that I know of any significance that took place in November of 2011 in New London was a switch to a mayoral form of government and the election of Daryl Justin Finizio as this city’s first elected mayor in 90 years.

Make of that what you will.

My personal thought is that all of the jockeying for position and the accompanying press conferences, press releases, executive orders, etc, etc and etc led to a media blitz that, while it may not have been the cause of our present predicament, certainly didn’t help us any either.


So what does it mean to be saddled with a “…AA- rating for general obligation bonds…” from Fitch?

I’m not sure of that either since, as I’ve already said earlier, Standard & Poor seems to think we’re in  pretty good shape and hasn’t burdened us with the dreaded Negative rating.

Imagine how the poor residents of Zion, IL, Youngstown, OH, Independence, KS and Port Townsend, WA are feeling after receiving, in the last 24 hours, a big fat NEGATIVE after their ratings which, in some cases, were as low as BBB!

Or the embarrassment suffered by members of the Zanesville City School District in Ohio, the South Carolina Public Service Authority or the Charlotte, SC Housing Authority all of which received ratings far worse than ours.

Frankly, I was so worried about some of these places after reading their bond ratings, etc that I actually went to some of their websites to see if they were still in existence. Amazingly, not only are places like Youngstown, OH, Independence, KS and Port Townsend, WA still there but it hurts me to say that their websites look a hell of a lot better than ours.

And, really, how bad off can we be if the city is still hiring and the mayor was able to find $34K that appeared out of nowhere to hire back, in November, his administrative aide who he had just laid off in September?

While I understand that we, like the rest of the world, are stuck with credit rating companies it may make you feel marginally better and put things in perspective to know that Fitch gave the entire United States a triple A rating with a NEGATIVE outlook while giving places I’m not even sure it’s safe to go to like Azerbaijan, Uruguay, Namibia and Kazakhstan all BB ratings or lower and a POSITIVE outlook.

Go figure!

Here’s a few more things that you might find interesting;  detractors  of credit rating agencies, and there are many, have pointed out that, at the very least, the agencies played a significant part in the  financial crisis of 2008 and 2009 and at the worst may have, in fact, caused it.

Joe Klein, Time Magazine’s Political Columnist, wrote “I remain amazed that anyone continues to take S&P, or Moody’s, seriously after both agencies granted AAA rating to Collateralized Debt Obligations (CDOs) that were chock-full-of crap mortgages, thereby helping to precipitate the 2008 financial collapse.

In a 2011 New York Times article reporting on an upcoming House Financial Services oversight committee’s hearing “…called to discuss the impact of new financial regulations on the major rating agencies… the ratings agencies’ own track record came under attack.” And not without reason.

From reports of bond issuers paying for the privilege of a top rating to flawed assessments on ratings of state and municipal debt over the years on to complaints of intimidation from greedy bankers and supervisors by former credit rating agency employees, the history of credit rating agencies is suspect and their future impact is in question.

So who, me, worry?

The city of New London has survived Benedict Arnold, the 1938 Hurricane, Captain’s Walk, Fort Trumbull, etc and I have faith that it will survive the credit rating agencies.









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Sue P. December 03, 2012 at 06:46 PM
Hmmm all of this stuff makes my head spin. But here is what seems to be happening. We (the city) were fine in January-May and then after realizing we did not have as much money as first thought we are suddenly in the red . But only after the massive amount of deals and spending. Now we are to the point that someone has contacted the Credit rating Agency's. Now who would do that? The only reason someone would want to contact the credit agencies and give them all this doomsday news is if someone is trying to make the city go into bankruptcy. Those are just my thoughts, would like to know some of yours.
Ken December 03, 2012 at 07:41 PM
Simple first step. Fire Paul and hire Kathleen. Then at least The Day's editorials would regain some credibility.
Kathleen Mitchell December 03, 2012 at 07:52 PM
Hi Ken, One of the things that has continued to bother me since I started researching this article is that nothing unusual or, that dreaded word again, NEGATIVE happened to New London's credit ratings until November 2011 and that much of the information that saddled the city with a AA- rating but still a good one, seems to have been provided by Mayor Finizio. If you take a look at the pdf files I uploaded, you will see that our ratings with Standard & Poor are excellent which only brought up another concern of mine; who provided Paul Choiniere with the Fitch information and why?
Wayne Vendetto December 04, 2012 at 03:18 AM
The effect of the Fitch rating, is basically nil, and has no bearing on our ability to borrow at a rate commensurate, with that before the downgrade. Lenders look at the average of the three scores when setting rates. That being said, the City has no business borrowing anything at this point. We should be focusing on cutting our spending, not figuring out the best way to spend more.By the way, the City is in the process of restructuring it's debt.What has become of that, and why did Choiniere not bother to report on it. Could it be that the outcome does not jibe with his story line?
Zak Leavy December 04, 2012 at 04:50 AM
The Credit Agency comes to when we sell our bonds. They evaluate our bond rating and our fiscal health. They take into account fund balance, debt, etc when they make their decision on our bond rating. The effect is certainly not "nil" since this is reality and if our bond rating agencies are downgrading us, it is not steps away from our problems but rather towards them.
Rick Lushay December 04, 2012 at 05:10 AM
But Duh Duh Duh Daryl does not get it Wayne. He will spend, spend, spend and the council except for 3 councilors will keep approving the money. Duh Duh Duh Daryl think he runs everything even who will run for office next year. He will be rudely awakened since he does not even realize that the referendum on the budget was as much a referendum on his inability to lead as it was on the budget.
Wayne Vendetto December 04, 2012 at 06:17 AM
Zak, what is not "steps away from our problem" is borrowing more. Also, you say "the bond rating agencies are downgrading us". One agency downgraded us. That is one out of three. It is the average that determines our bond rating. All three have the same info, and only one moved .In any event, this should be a moot point, because we have no business borrowing. How did the Fitch downgrade, which still leaves us with a decent rating, effect our recent refi?
David Irons December 04, 2012 at 02:51 PM
I would point out to some readers that this is the Patch, not The Day. Paul Choiniere writes for The Day. Those who question his opinions might be wiser to post on his column or blog or write a letter to The Day.
Kathleen Mitchell December 04, 2012 at 05:42 PM
Zak, The problem with these continued reports of New London's financial crisis is that, generally, they are taken out of context and lead too many people to believe that New London stands alone in it's current financial difficulties. Reading the ratings and commentary from Standard & Poor, Moody's and Fitch's is really beginning to make my head hurt but I'm trudging on down the road in the interest of fairness and justice for the city we love. (Not bad) For example, our neighbors Montville, Colchester and the City of Groton all of which have lower ratings than us to begin with have been downgraded with Groton and Montville receiving the dreaded NEGATIVE outlook. That's not to mention the fact that the City of Groton has lost MILLIONS on their cable TV venture. But the administrations of those towns are not scaring the residents to death with dire warnings of imminent disaster. Council President Michael Passero said in his remarks Monday evening "...the City of New London is not unique in its bleak financial situation and the attempts to blame our current difficulties on past Councils or past administrations is disingenuous. The country is emerging from the greatest economic crisis since the Great Depression and the City of New London is suffering along with most governments, great and small, across this nation, including our state and national governments." I believe he's absolutely right and that it's important to keep everything in perspective.
Wayne Vendetto December 04, 2012 at 05:59 PM
The end game here is scare the people into raising taxes with as little resistance as possible. When I fill up my car at $3.69 / gallon, I feel like I am getting a bargain, because it is no longer $4. The reality is, I am getting hosed even at$3.69. Create a disaster where one does not exist, and people will be relieved when it is "just" a crisis. David, I for one, realize this is Patch, and not the Day. I gave up my subscription to the Day, because of half truth opinions like the one we are discussing now. Don't be fooled for a second into thinking The Day, is not reading these posts.
David Irons December 04, 2012 at 06:35 PM
Wayne, I have no doubt that the editors at The Day read these posts and blogs. But many of their readers, who read the opinions published in The Day, may not read Patch. If you want to get through to those readers, you should be writing a letter to the editor of The Day. There is no requirement that you be a subscriber to submit a letter. There is no guarantee that your letter will be published, but then there is no guarantee that letters from subscribers will either.
Clark van der Lyke December 04, 2012 at 06:58 PM
Is this off topic? The Day?...I think it is time to subscribe to the Norwich Bulletin. Besides, the Day won't let me post comments anymore. I don't even know who I offended. I learned to dislike credit bureaus after working for Retail Credit Corp. one summer. The more negative reports the more they paid. I don't think they have changed. New London has value if for nothing else than location, location and location. Montville and Colchester can't compete with that.
Kathleen Mitchell December 04, 2012 at 07:32 PM
Clark, NO WAY! Are you serious? The Day banned you of all people? They banned me for awhile but that's somewhat understandable-maybe. Who could you possibly offend on The Day except, possibly, Timothy Dwyer or, maybe, the other Tim but I can't imagine that there is anyone else with such a small mind that s/he would be offended by anything you might say. Oh for the good old days of Morgan and Greg!
Wayne Vendetto December 04, 2012 at 08:55 PM
The Day, is no more a newspaper, than the roll in the bathroom is. Gone are the days of actual reporting. It may be convenient for that paper to blame a more tech savvy generation for it's decline in subscribers, but like their reporting, that is only half the truth. If you want actual reporting, without biased opinion, Patch, at least New London Patch is the place to turn.Thanks for only reporting Dirk. The Day , is no more than a giant opinion piece.Clark, consider the source and wear it as a badge of honor.
Kathleen Mitchell December 05, 2012 at 06:56 PM
I just uploaded the four-year forecast for Connecticut, CT Executive Summary, prepared by the New England Economic Partnership a "... non-profit organization dedicated to providing objective economic analyses and forecasts." Basically what it says is that, while Massachusetts, New Hampshire and Vermont will show a good economic recovery rate over the next few years, "...Rhode Island’s unemployment rate will remain the highest in the region..." and Maine and Connecticut will have one hell of a hard time reaching pre-recession levels. Part of CT's problem, according to a recent NEEP press release "In summary, the reversal of the Bush tax cuts, elimination of the social security tax cut and the federal sequestering of defense and social service funds could cost between 34.000 and 124,000 Connecticut current and potential jobs. Provisions of the Affordable Care Act (Obamacare) should help Connecticut hospitals and managed care firms, but pose revenue and profit challenges for Connecticut health insurance companies including Aetna and Cigna. Lastly, federal energy policy will most likely continue to be focused on production safety and environmental consequences rather than increasing production. Connecticut has some of the highest energy prices in the nation and will increasingly be at a competitive disadvantage because of energy costs." My point, again, is it's not only New London.


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