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Please, can we stop threatening the voters with catastrophe if they exercise their right to Vote NO on Question 1! You may have heard an argument for this Override that goes something like this: "If we don't pass this override, Brookline's AAA Bond rating
will be at risk, impacting borrowing costs!" Is this a fair warning? No. First, some background on bond ratings: they judge a borrower's (in this case, the Town of Brookline) ability to repay its debts (Brookline has over $600 million in outstanding debt). Our AAA rating is the highest on the scale, representing minimal risk of non-payment for investors. Most Towns in Massachusetts have high-quality bond ratings ranging from AAA-single A. Important factors influencing a rating include: the local economy, the size and wealth of the tax base, and the amount of debt the Town has outstanding. In Massachusetts, voter support for Prop 2 1/2 overrides and debt exclusions is also viewed positively as these allow a Town additional financial flexibility. However, a bond rating ultimately reflects the cumulative impact of multiple inputs: tax base growth trends, debt/borrowing trends, and liquidity/fund balances, in addition to override results. So, not only is a downgrade upon one failed override unlikely, it is extremely unfair to point at voters considering an override and blame them for a potential downgrade! One could choose any of a number of financial decisions to similarly "blame" (increased borrowing, anyone?). The Town of Marblehead provides some food for thought: since 1982 this Town has had 18 failed overrides, not one has passed since 2005. Yet Marblehead hangs on to its AAA bond rating. Newton also had a failed operating override in 2023, yet remains AAA rated. Multiple factors matter. Moreover, if our rating agencies become concerned, their first step would be to reduce our “stable” outlook to “negative”. That happened just a few days ago in Marblehead, because it persistently drew down on reserves to balance its budget. Since Marblehead last rejected an override in 2023, that was not the factor that led to the change in outlook. Changing the outlook puts a town on notice and gives it time to put its financial house in order, to avoid an actual ratings downgrade. But what if the Town does get downgraded? What would be the bottom line for our borrowing costs? Since Brookline's existing debt is fixed rate, borrowing costs on our outstanding debt would not be impacted. For any future borrowing, the interest rate would reflect market conditions at the time, including the Town's current rating, but also considering the interest rate environment and other "technical" market factors. For example, in 2022, the Town was able to borrow at 2.55% yet our 2025 borrowing resulted in a 4.45% rate, despite the Town being AAA rated in each case, because market conditions had changed. All else equal, a AA rated bond might pay 0.25% more in interest for a 20 year bond. For a $100 million borrowing, this would equate to $250k/year, or less than 0.1% of Brookline's tax base. Bottom line: A rating downgrade based on one failed override vote is highly unlikely. And if a downgrade were to occur, borrowing costs would remain extremely favorable. Don’t fall for the bond-rating scare tactics. Vote No on Question
1 on May 5 and bring some fiscal common sense to Brookline!
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