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S&P Report for Springfield, Mass., 1-28-2014

S&P Report for Springfield, Mass., 1-28-2014

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Published by masslive
Standard & Poor’s Rating Services has raised Springfield’s credit rating from “A” to “AA-,” a reflection of continued improvements in financial stability and management, city officials announced Tuesday.
Standard & Poor’s Rating Services has raised Springfield’s credit rating from “A” to “AA-,” a reflection of continued improvements in financial stability and management, city officials announced Tuesday.

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Categories:Types, Brochures
Published by: masslive on Jan 28, 2014
Copyright:Attribution Non-commercial


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Springfield, Massachusetts; GeneralObligation; Non-School StatePrograms; Note
Primary Credit Analyst:
Apple Lo, Boston (1) 617-530-8316; apple.lo@standardandpoors.com
Secondary Contact:
Victor M Medeiros, Boston (1) 617-530-8305; victor.medeiros@standardandpoors.com
Table Of Contents
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Springfield, Massachusetts; General Obligation;Non-School State Programs; Note
Credit Profile
US$14.089 mil GO BANs dtd 02/14/2014 due 02/13/2015
Short Term Rating 
 SP-1+ NewSpringfield ICR 
Long Term Rating 
 AA-/Stable Upgraded
Springfield Non Sch St Prgm
Unenhanced Rating 
 AA(SPUR)/Stable Affirmed
Standard & Poor's Ratings Services raised its issuer credit rating (ICR) on Springfield, Mass.' general obligation (GO) bonds to 'AA-' from 'A' based on our local GO criteria released Sept. 12, 2013. The outlook is stable.Standard & Poor's also assigned its 'SP-1+' short-term rating to Springfield's series 2014 GO bond anticipation notes(BANs).At the same time, Standard & Poor's affirmed its 'AA' long-term rating on Springfield's commonwealth-qualified GOqualified school construction bonds and affirmed its 'AA' underlying rating on the city's previously issuedcommonwealth-qualified debt. The outlook on all long-term ratings is stable.We base the 'AA' ratings on the bonds' eligibility under the commonwealth's Chapter 44A Qualified Bond Act.Massachusetts' emergency finance board has authorized the city to issue bonds or notes, including this issuance, ascommonwealth-qualified bonds.The short-term note rating reflects our criteria for evaluating and rating BANs. In our view, Springfield maintains avery strong capacity to pay principal and interest when the notes come due. The city maintains what we view as a lowmarket risk profile because it has strong legal authority to issue long-term debt to take out the notes and is a frequentissuer that regularly provides ongoing disclosure to market participants.The city's full faith and credit secures the notes and bonds. We understand that proceeds of the notes will be used tofund various capital improvement projects and equipment purchases.In our view, the ICR is based on our recently released local GO criteria and reflects our assessment of the followingfactors:
 Weak economy, with lower wealth and incomes, but that is considered broad and diverse;
 Strong budgetary flexibility, with available reserves above 8% of general fund expenditures;
1250549 | 300171391
 Adequate budgetary performance due to costs related to rising pension and other postemployment benefits, as wellas subsidy from general fund to trash enterprise fund;
 Very strong liquidity providing very strong cash levels to cover both debt service and expenditures;
 Very strong management conditions led by formalized financial policies and an experienced and capablemanagement team; and
 Very strong debt and contingent liabilities position, mostly reflecting the city's rapid amortization and low debt burden, which is being offset by sizable pension and other postemployment benefits (OPEB) liabilities.
Strong budget flexibility
The city regained local control over its finances on June 30, 2009, and prepared its first budget for the 2011 fiscal year.This occurred after five years of oversight and management by the commonwealth-created Springfield Finance ControlBoard. For fiscal 2013, available general fund reserves closed with a balance of $92 million, equal to 15.5% of expenditures. For the 2014, the city appropriated about $7.3 million of the stabilization reserve to balance its budget. If the drawdown materializes, the fund balance will still remain within the range of 8%-15%.
Adequate budgetary performance
While we believe that long-term budgeting challenges will persist, in our view, Springfield has recently demonstratedthe capacity to execute key reforms to manage near- and long-term fiscal challenges. Budget balancing solutions havelargely centered on the expenditure side as the city has little revenue-raising flexibility. We understand Springfield is atits levy ceiling and, therefore, cannot approach voters for an operating override. Annual staffing reductions since fiscal2008 (through a combination of layoffs and attrition) resulted in a 24% drop in full-time equivalent positions. We believe management's actions to date have been significant and officials report the city is now functioning at its coreservice level. Management also reports it might make further cuts as needed and expects the fund balance to remain ator near current levels, absent new development. Springfield ended with small general fund and total governmentalfunds deficit of 0.2% and 0.8%, respectively, after adjusting for timing-difference in state and federal grants revenuesand expenditures. We believe that the city's sizable OPEB and pension obligations will continue to pressure the city'sfinancial performance. Offsetting the pressure include additional revenues from the local casino development, whichcould potentially add $20 million of recurring revenue in the form of excise tax starting fiscal 2017.
Very strong management conditions
We view the city's management conditions as very strong, with formalized and sustainable financial practicescombined with a capable and experienced management team.
Very strong liquidity
Supporting Springfield's finances is what we consider strong liquidity, with total government available cash at 20% of total governmental fund expenditures and at 380% of debt service. Further enhancing our view of the city's liquidityposition is that Springfield maintains strong access to external liquidity. The city is a regular market participant, havingissued bonds frequently in the past several years, including GO bonds and short-term BANs.
Very strong debt and contingent liability profile
Following this bond issue, Springfield has about $247 million of total direct debt outstanding. Included in thiscalculation is about $14 million of BANs outstanding. Overall, the city's total governmental funds debt service is 5% of total governmental funds expenditures and net direct debt is 22% of total governmental funds revenue, levels we
1250549 | 300171391
Summary: Springfield, Massachusetts; General Obligation; Non-School State Programs; Note

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