Boston has saved $28 million in debt service because of rating upgrades on its 10 borrowings since 1985, says a report released this month by the city's collector-treasurer.
"These savings mean that the city can provide more and better services for the same level of tax support," says the report, authored by Lee F. Jackson, the collector-treasurer. "The city also saved a total of $129.5 million in interest costs by obtaining federal insurance for the bonds issued to finance the new Boston City Hospital."
Boston's "sound fiscal management," which the report says resulted in five consecutive balanced budgets, has also allowed for infrastructural improvements.
During the tenure of Mayor Raymond L. Flynn, the city has gained increasing credibility in the credit markets while the reputation of the state has been tarnished.
When Mayor Flynn took office in 1984, Boston's uninsured bonds carried ratings of Ba1 from Moody's Investors Service and BBB-plus from Standard & Poor's Corp. Massachusetts general obligation debt was rated A1 by Moody's in 1984, and Standard & Poor's Corp. rated the state's bonds AA in June 1984.
Moody's has upgraded Boston three times since 1984. Its current ratings, the report notes, are the highest in the city's history.
The city's report trumpets a "financial record [that] was achieved at a time when state and federal deficits are at an all-time high, and many of the nation's cities are on the verge of fiscal collapse." Bridgeport, Conn., on June 6 became the first city of its size to file for protection under Chapter 9 of the federal Bankruptcy Code.
Boston, in its report, calls itself "the only major Northeastern municipal credit to have a higher rating now than in 1988."
As a result of Boston's impressive rating track record, a recent sale of $96.2 million in general obligation bonds cost the city only 6.83% in total interest, issuance, and insurance. "This interest rate compares favorably with that on the $576.4 million general obligation issue sold by the Commonwealth of Massachusetts the previous week, which was 7.61%," the report says.
Boston would have had to pay an additional $7.2 million to borrow its $96.2 million, if it faced the same interest and insurance costs as the beleaguered commonwealth.
The city also has plans to cope with continued fiscal stress, the report says. For example, it hopes to collect property taxes on a quarterly basis, a move that "should obviate the need for any short-term borrowing." As it is, the city has not resorted to cash-flow borrowing since fiscal 1987.