Westminster’s Credit Rating Improves,
Jobless Rate Soars
by Jay Shenk
Standard & Poor’s, one of the three big credit rating agencies (the other two are Moody’s and Fitch) has raised Westminster’s credit rating from single A+ to double AA, a move that will significantly lower the interest the Town of Westminster must pay on future debt. Westminster is one of 29 “Eastern Region” Municipalities whose credit rating was raised.
This move by S&P came as a surprise, as Westminster was not in the process of issuing debt, which is when ratings usually are changed, and is an indirect result of the current worldwide credit crisis and the drop in value of many bonds that were previously rated AAA by these same agencies. Now, these credit rating agencies are under much closer scrutiny by the SEC as well as Congress, because during the housing bubble they rated debts, such as securitized mortgages and credit default swaps, as extremely safe, and it turned out those bonds were in fact anything but safe and secure, resulting in big financial losses for many individuals as well as financial institutions.
Consequently, these rating companies are being much more careful and thorough, a state of affairs which has them looking carefully at all credit ratings they issue, including ratings for small towns. When they looked closely at Westminster and the information supplied by Town Treasurer Melody Gallant, they found that our finances are in better shape than they had expected, and thus the raising of our rating. The primary factor in this change was that we are not using our cash reserves for our operating expenses, something many other towns and the state cannot say.
Other factors are that Westminster has a relatively small debt load, some commercial development, a growing tax base (albeit slowly), and a relatively strong median income.
At the September 14th Board of Selectmen’s meeting, people responsible for this credit rating improvement were recognized, including department heads, the Board of Selectmen, the Advisory Board, and policies set up ten years ago, all of which helped to control costs relative to tax income, leading to this outcome.
To realize any savings immediately from this rating change requires refinancing existing debt. The sewer extension debt is the most likely candidate for refinancing. The Public Safety building cannot be refinanced as it is so close to being paid off (in 2011), and the Crocker Pond debt is probably too short term (only 7 years). Savings from this change will be most noticed if more debt is taken on, although the addition of debt could possibly affect the credit rating, as our low debt load was a factor in the credit rating improvement.
All involved in this improvement in our finances deserve recognition. Particularly in the current economic climate, this change is very unusual. It’s the municipal equivalent of having the bank come to you and tell you that your credit is so good, if you want to borrow more money the interest rate will be lower. When was the last time your credit card company sent you a notice telling you that your credit was so sterling that they were lowering your fees and interest rate, (and it was a legitimate cost savings and not just a sales pitch)? It’s an unusual occurrence that we should all be proud of. The complete document listing other towns in the Eastern Region can be viewed by following this link.
Despite the credit upgrade, not all is rosy on the financial front in Westminster. At the same Selectmen’s Meeting that the credit rating improvement was announced, Ken Burstall from our Advisory Board cited our unemployment statistics supplied by the Bureau of Labor Statistics. In July of this year 9.73% of Westminster residents were receiving unemployment benefits. That is bad enough, but another 4.61% are unemployed yet have already received the maximum number of weeks of unemployment benefits, so they no longer qualify for unemployment. The combination of these two numbers puts the unemployment rate at 14.34%, a historically very high number.
On top of this 14+% unemployment rate, the Bureau of Labor Statistics estimates that another almost 6% of the Town of Westminster is ‘underemployed’, meaning that they are working less hours or receiving less benefits than they had earned prior to the recession. Taken together, these numbers translate into over 20% of our fellow working age citizens in Westminster being either unemployed or underemployed.
These are alarming statistics, but not surprising. Yes, the stock market has rebounded nicely, up over 50% from its lows immediately following the crash. However, so far it’s been a jobless recovery, with corporations fighting their way back to profitability by cutting costs instead of increasing revenues. Unfortunately, the main expense in most businesses is cost of labor, and that’s where the cuts have been made.
Just looking around our neighborhood, it’s easy to see the fallout of the financial crisis. On one side of us is a rental house—it’s been vacant for over six months now. On the other side is a single-family house that has been vacant for almost two years, ever since the owner died. There’s been no activity whatsoever to sell, fix up or rent this house, and the mortgage is probably “under water”.
These pictures tell the story—there’s an in-ground pool, now home to a virtual rainforest worth of frogs, overgrown shrubbery, and a frayed American flag hanging symbolically on the wall. We wonder if anyone even knows who holds the mortgage. Is this one of those homes whose mortgages were bundled up and sold to investors and banks, and now sit on the books somewhere as a “toxic asset”? We don’t know, but it’s been vacant for almost two years with no sign of any action being taken to sell it. Across the street from this house sits a condo with a For Sale sign, but this is probably about the 10th different realtor to take on the task of trying to sell it. The condos were built in 2004, yet they still have not all been sold. A foreclosed house in our neighborhood just sold for $129,000. At the height of the market it sold for $240,000.
Around us there are friends who are underemployed, unemployed, forced to take unpaid furloughs, and when their jobs were eliminated, offered impossible relocation opportunities to third world countries at greatly reduced salaries—thanks a lot. Good jobs are hard to come by right now.
However, there are what economists call ‘green shoots’….the housing market seems to have hit bottom, which is the first step to recovery, the stock market is soaring, inflation is not a factor right now, inventories are depleted (production is needed to replenish inventories), international trade is perking up, and many out of work people are starting their own businesses. There is reason for optimism in the future, but right now, here in Westminster, jobs are still the first priority. We are lucky to live in a town where ‘neighbors helping neighbors’ isn’t just a slogan but a way of life.
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