Topsfield, MA GO Bond Rating Raised To 'AAA' From 'AA+' On Improved Financial Position And Debt Management

NEW YORK (S&P Global Ratings) Feb. 11, 2019--S&P Global Ratings raised its 
long-term and underlying ratings on the Town of Topsfield, Mass.' general 
obligation (GO) debt to 'AAA' from 'AA+'. At the same time, S&P Global Ratings 
assigned its 'AAA' long-term rating to the town's series 2019 GO municipal 
purpose loan bonds. The outlook on all ratings is stable. 

"The upgrade reflects our view of the town's consistent operating surpluses 
supporting continued reserve growth amid a rising debt burden, underpinned by 
a formalization of its management practices and policies on debt management 
and reserves in December 2018, which provide a strategy for maintaining the 
town's financial health," said S&P Global Ratings credit analyst Rahul Jain. 
2018 audited results portray a sustained commitment to increasing funds set 
aside for the payment of long-term liabilities, including other postemployment 
benefits (OPEB), while managing to its largest operating surplus over the last 
five years. In addition, we expect surplus results will continue in fiscal 
2019, inclusive of amounts budgeted for reserve set-aside.

The town's full faith and credit pledge secures the bonds. The town's bonds 
are subject to Proposition 2-1/2 and are therefore a limited GO. However, due 
to the town's revenue-raising ability and fungibility of those resources, we 
have not made a rating distinction between the limited and unlimited nature of 
the pledge. Bond proceeds will be used to permanently finance approximately $6 
million, $4 million, and $3.5 million in bond anticipation notes for a town 
hall remodeling and addition, water treatment facility, and school roof 
replacement, respectively, the first and third of which are excluded from the 
state's Proposition 2-1/2 debt service levy limitations. While the bonds are 
GOs of the town, Topsfield intends to raise the necessary water-user charges 
and fund the debt service related to the water treatment facility project 
through its water enterprise fund. We also note that based on the expected 
payment of debt service through water revenues, the debt does not count toward 
the town's Proposition 2-1/2 debt cap. 

The stable outlook reflects S&P Global Ratings' expectation that Topsfield's 
very strong management practices and policies, supported by very strong wealth 
and income levels, will continue to produce balanced operating results, with 
maintenance of very strong budgetary flexibility and liquidity levels. For 
these reasons, we do not expect to change the rating within our two-year 
outlook horizon.

However, if budgetary performance were to weaken, either on a sustained basis 
or due to a significant event, straining reserves or available cash, we could 
lower the rating.
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