Fitch drops Milford bond rating, S&P maintains AAA

Milford City Hall, Spring 2021

Milford City Hall, Spring 2021

Hearst Connecticut Media

MILFORD - The city’s bond rating has taken a hit from one of the three big rating agencies.

Fitch announced that after examining the city’s financials, it chose to drop the Milford bond rating from AAA to AA+.

A second rating agency, Standard & Poor’s Global Rating Services, maintained the city’s AAA rating. Both ratings left Mayor Ben Blake pleased with the city’s financial standing.

“Overall, Milford received extremely positive feedback on its financial management and affirmation of its high rankings from S&P and Fitch,” Blake said.

S&P again reaffirmed the city’s high bond rating, according to Blake, by highlighting Milford’s “very strong liquidity, strong flexibility and a manageable debt and liability burden…strong management, with good financial policies and practices.”

Fitch cited the city for its “superior level of budgetary flexibility in the form of solid revenue and expenditure controls as well as solid reserves.”

According to Fitch’s report, the city ended fiscal 2020 with an unrestricted general fund balance of $37.2 million or 16 percent of spending and estimates for fiscal 2021 indicate a small draw on reserves.

The city, the report stated, has maintained a solid level of reserves through economic cycles. Fitch considers “the city’s inherent budget flexibility superior given the city’s legal unlimited ability to raise revenues and solid level of expenditure flexibility.”

“Fitch’s view of the city’s conservative budget management and its recent strong financial results is tempered by multiple years of underfunding of the pension” fund, according to the report. “Reserve levels have been built up during the economic expansion and financial results have not relied on property tax rate increases.”

That said, Fitch’s rating adjustment from AAA to AA+ was based in part on the Actuarial Valuation Report of July 1, 2020, which Blake said did not include the $85 million growth of Milford’s pension fund over the past year.

“As soon as the actuary delivers this year’s report, the city will provide the delayed, July 1, 2021, actuarial valuation to the rating agency that confirms the city’s pension is now the largest it’s ever reached at more than $435 million,” Blake said.

“Milford continues to have one of the most well-funded pensions in the state,” Blake added. “Each year the city funds its obligations on a stable, predictable and responsible basis, consistent with the legislatively required financial policies.”