Somers officials debate bond rating

SOMERS — As Somers prepares to split into a village and town, officials are grappling with the municipality’s financial health.

Specifically, they’re looking at what do to, if anything, with the sliding Moody’s bond rating affecting how much the municipality pays for debt for infrastructure projects.

“There is a bit of a cloud hanging over the town right now with the Moody’s actions,” Somers financial adviser James Mann of Ehlers Inc. recently told the board.

Moody’s provides credit ratings and research covering debt securities and has been downgrading Somers’ rating steadily for the last two years. from Aa3, or very low credit risk in 2013, to a Baa2, moderate credit, risk this year.

The rating makes a difference: For a bond of just over $1 million, a rating of AA would cost Somers $289,494 in interest; a rating of BB raises that interest cost to $367,651.

The rating is based on Somers’ financial decisions over the last few years, including funding of the reconstruction of the town hall but more importantly the state of the town’s reserves, which have been in the negative for consecutive years.

Somers officials put $250,000 into filling that hole last budget cycle, but it’s still in the negative by about that much this year.

Downplaying the rating

“Some people hang on to the bond rating as something. But the bond rating doesn’t affect us as I see it,” Town Chairman Ben Harbach said. “The loans that we have with the State Trust Fund are competitive with commercial loans.”

The town has been opting for negotiated bond sales and dipping into the State Land Trust Fund to avoid the competitive bond markets where Moody’s rating is a big factor.

The town recently borrowed money for the Highway E sewer project by going to the State Land Trust Fund for a 3.75 percent interest loan for the $2.5 million project.

The village is also set to refund more than $9 million of its existing debt, which goes back to 2008, in a negotiated bond sale May 26.

“We’re not borrowing with Moody’s. We don’t care about the bond rating. The State Land Trust doesn’t care about the bond rating. There was always escalators. That’s why we have refunding today,” Harbach said.

George Stoner, who is running unopposed for village president, also waved off the importance of the rating.

“In my opinion, the bond rating is going to take care of itself,” Stoner said.

Improving the rating

Somers village trustee candidate David Geertsen, who’s also the Kenosha County finance director, said the bond rating needs to be addressed.

“One of my goals is to work with the village to help them with the bond rating. I have a lot of ideas,” Geertsen said. “I would like to position the village so they can go to the open market and save significant expense on financing our infrastructure.”

Geertsen said if Somers improves the bond rating, it will be able to get better interest rates on negotiated bond sales too.

Candidate Jack Aupperle agreed, saying the financing of debt affects all residents. He blamed the recent projects of a 50 percent jump in his tax bill, from $1,036 in 2010 to $1,559 in 2014.

“The million-dollar expansion on the town hall is part of the taxes being raised,” Aupperle said. “It will be equally important to manage the revenue generated by economic growth. I want to make sure every dollar that’s in there provides the best value for the residents’ money.”

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