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Norwalk's Bonds Sold in the Nick of Time

NORWALK, Conn. - Norwalk's officials knew there might be scrutiny from Moody's Investors Service soon. "Who knows what's going to happen after what goes on in Washington?" Mayor Richard Moccia said Friday, referring to a possible "ripple effect" if the federal government were to default on its obligations.

Moments after he said that an email from Norwalk's finance director Thomas Hamilton landed in his inbox. Moody's had placed Norwalk's Aaa bond rating on review for possible downgrade. That "threw us for a loop," Hamilton said.

Norwalk is one of 177 United States public finance issuers on Moody's watch list. Also included are Easton, Fairfield, Darien, Greenwich, New Canaan, Westport, Weston and Wilton. Stamford is not on the list, as it was downgraded last year.

Concerned about the problems in Washington, Norwalk had moved up its latest bond sale from its originally scheduled date of Aug. 2 (the date the federal government may go into default) to last Thursday. That appears to have been fortuitous, as the bonds were sold before Moody's made its announcement.

The bonds went for $18 million. The 20 year bond issue went for a true interest cost at 3.35 percent, Hamilton said. That rate is "pretty good," according to Moccia. "I think last year we had slightly lower, but the year before we had slightly higher," he said. "We've been in the 2.8 to 3.3 range for the last several years, that's because of the triple A bond rating."

There is no damage in the immediate future, because the next sale won't happen for "roughly a year," Hamilton said. "I'm happy that we were able to kind of beat the worst of this fiscal situation going on," he said. "Hopefully by the time we have to issue again next year things will have settled down."

Bonds are typically sold once a year unless the city is doing an Advance Refunding to lower the interest rate it is paying.

Hamilton was surprised by Moody's announcement. "On Wednesday I thought we were in a group that would not be on this list," he said. "That was not the case. They had earlier suggested that they were going to be focusing on the number of federal employees that are in the workforce in your jurisdiction and your susceptibility to impacts from Medicaid and Medicare. Since we don't get Medicaid and Medicare and because we don't have a significant federal workforce I assumed we were safe. It turned out not to be true.

"We haven't been downgraded, we've been put on a list to be evaluated further, is what it comes down to."

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