Anyone remember when Town Supervisor Earle Reed was patting himself on the back for increasing the town’s bond rating? He mentioned it at a town board meeting--even posted “the letter” from Standard & Poor's on the Town website and I believe there was mention of it in the Observer Dispatch.
Excerpt From the December 28, 2006 Town Board Meeting:
Town’s Bond Rating
Supervisor Reed acknowledged receipt of a letter from Standard and Poors reaffirming the Town’s Bond Rating at “A”, an increase to stable from negative.
You had to be at that town board meeting to really see how proud Town Supervisor Earle C. Reed was of the town's accomplishment! Here is the letter from the town’s website, or at least the part they wanted residents to read:
Standard & Poor's
But, being that some members of Concerned Citizens for Honest & Open Government are bankers and financial people, we realized that there had to be more to the letter than the two (2) pages posted on the town website. So we did the only thing we could---we submitted a Freedom of Information request to get a complete copy of the Standard & Poor's letter.
Well, we finally received our copy from the Town Clerk--it cost us $1.00 because copies are $.25 per page. Hmm! If you do the math—that means that there is actually four (4) pages to the letter—not two (2) like the town wanted everyone to believe!
So what part of the Standard & Poor's letter did the Town Board leave out? Well, they left out the explanation of why Standard & Poor's gave them an increase from negative to stable. Here is the complete Standard & Poor's letter—pages 1 & 2 are exactly what the town board made public, but let’s concentrate on pages 3 & 4.
I'll begin by telling you exactly what is so important about a Standard & Poor's rating. Here is a statement right from Standard & Poor's website:
Every day investors and financial professionals the world over look to one firm for financial market intelligence that is authoritative, objective and credible. Standard & Poor’s credit ratings, indices, investment research and data provide financial decision-makers with the information and opinions they need to feel confident about their decisions.So if a town were going to bond, they would ask Standard & Poor's to rate them so they could get the best rate of interest on their bonds and a good rating makes it easier to "sell" the bonds. O.K., good job Supervisor Reed--you raised our rating, but unfortunately, it would appear that you either aren't telling residents the truth or you are stretching the truth to Standard & Poor's. Which is it, Supervisor Reed?
So what information will we find on the missing pages 3 & 4? There are probably several half-truths, but let's concentrate on the "biggies", shall we?
On page 1 of the additional pages (or page 3 of our pdf file), it says:
"Furthermore, new management estimates an additional surplus of approximately $2 million by year-end, bringing the total fund balance to roughly $5 million, which would be a 79% increase from the prior year's ending fund balance."
What? Where do you plan on getting an extra $2 million to put in the Reserve Fund, Supervisor Reed?
Here's another good one on the bottom of page 2 of the additional pages (or page 4 of our pdf file):
"Management is anticipating a possible debt issuance in early to mid 2007 for a storm water improvement project and for a court and police building project, totaling approximately $3 million."
Really? I could have sworn that the TOTAL bonding amounted to $4.6+ million and I thought the storm water project was for $2 million and the police building was for $1.5 million--that makes $3.5 million, not $3 million. And why does Standard & Poor's think we have a court building project? You told us that was a mistake on the first Bond Proposition #5 we saw. In fact, you even finally changed the Bond Proposition, remember, Mr. Reed? Now I don't know what to believe! Was the fact that the first time we saw Bond Proposition #5 and it said it is for a court facility really a mistake, or does it all fit in with Hon. James Tormey's visit to the March 14, 2007 Town Board meeting? I saw an article regarding his visit in the March 15th Observer Dispatch. The article said, "District Administrative Judge James C. Tormey and Supervising Judge James P. Murphy, who made the presentation, said they're interested in making New Hartford Town Court a model court and are trying to get additional funding from the state to carry out the redesign process". I was there, and I heard the presentation. Town Justice William Virkler was also there, but the Observer Dispatch didn't mention him.
Also, Supervisor Reed, did you forget to mention to Standard & Poor's the other $1.6 million of bonding you are asking voters to approve on March 29, 2007? I thought the total bonding amounted to $4.6+ million, not $3 million as you told Standard & Poor's. Am I wrong about that?
So you may ask where does Standard & Poor's get their information? Maybe they are the ones that made a mistake. Au contrare!
Excerpts from page 1 of the Standard & Poor's letter:
"The rating is based on informatin supplied to us by you or by your agents but does not represent an audit. We undertake no duty of due diligence or independent verification of any information. "
"Standard & Poor's relies on the issuer/obligor and its counsel, accountants, and other experts for the accuracy and completeness of the information submitted in connection with the rating. To maintain the rating, Standard & Poor's must receive all relevant financial information as soon as such information is available."
Now I get it! Standard & Poor's is merely giving you a rating based on what you told them or somebody reporting to them on your behalf told them, "aye?" Supervisor Reed. Holy Cow!
This discussion is to be continued. It gets complicated so we will give it to you in "doses". We will let you know our take on why Supervisor Reed thinks he "needs" a comptroller or CFO or whatever he is calling the job these days.