The finance departments in Montville and New London are keeping a nervous eye on the municipal bond market, as the credit crunch could interfere with two crucial bond issues scheduled for next month.
On Oct. 9, the New London City Council will vote on a $13.5 million bond issue to fund infrastructure improvements, while Montville residents will vote on Tuesday on whether or not to bond $11.7 million in order to pay damages to Rand-Whitney.Still, the finance directors in both towns are urging caution but are nevertheless confident the market will stabilize when they plan to issue the bonds.
“Our financial advisers are telling us now is not a good time,” New London Interim Finance Director Donald Goodrich said.
But Goodrich said that if the City Council approves the $13.5 million bond, which will fund the purchase of new public works vehicles, pay for pavement improvements, and bankroll renovations to the high school athletic complex, the bonds may not be put on the market for a few months.
Councilor Rob Pero, chair of the Finance Committee, echoed Goodrich, saying that the issue could be held “for three or four months.”
“From people I’ve talked to,” he said, “bonds are not selling.”
In addition, Pero said he would like to get some figures on the property revaluation to get an estimate on the city’s revenue stream.
“We need to take that into perspective,” he said.
Goodrich said that the city’s bond rating is A+ according to Standard and Poor’s.
Also, Goodrich said that though credit markets nationally have been dire of late, it would have been worse for the city had they approved the bond in August, than if it were issued in the past week or so.
“The vote is the first step,” Goodrich said. “We can give it a month to six weeks to see if the market settles down.”
City Manager Martin Berliner said the city will consult with its financial advisers as to the appropriate time to issue the bond.
”We’re not going to rush,” he said.
Montville Finance Director Theresa Fafard said the town has a AAA rating from Moody’s and hopes to issue the bond in mid-November, if it passed on Tuesday.
Fafard acknowledged there is “uncertainty” in the bond market now.
“We’ve been in contact with our financial advisers,” she said.
If the bond issue fails at the polls, the town would need to find other means of paying the $11.7 million it owes to Rand-Whitney.