Rodney, the town manager, told the Select Board Feb. 18 that S&P Global Ratings revised its U.S. municipal rating methodology and that the town’s score was lowered from AAA to AA+.

“The change in methodology placed greater weight on pension and OPEB liabilities, and as a result we were moved back down to double A plus,” Rodney said. He told the board that S&P preserved Danvers’ scores for financial management, budget performance and reserves but judged long-term liabilities to be a limiting factor.

Rodney said the downgrade is frustrating but that the town has no major financing needs immediately on the horizon. The largest recent project, the Smith School, was bonded while the town held AAA and locked favorable long-term rates. The manager said planned and potential projects in the near term — smaller water and sewer work, a possible school roof, and rehabilitation or replacement of a DPW facility — are not expected to trigger borrowing that would be materially affected in the short term.

Board members asked what the downgrade means for the town’s fiscal strategy and whether S&P’s change in methodology incorporated forecasted growth. Rodney said the downgrade reflects a methodology change rather than specific new local weaknesses, and that S&P assigned a stable outlook. He said the town will continue to strengthen reserves, follow best financial practices and fund pension and OPEB obligations according to long-term plans. Rodney noted the town’s pension plan is scheduled to be fully funded in 02/2035 and that the town makes annual contributions to an OPEB trust to lower that liability.

When asked whether accelerated paydown of liabilities would be possible, Rodney said choices to speed liability reduction would likely require service reductions or other trade-offs and that staff would not recommend actions that unduly impaired services.

Why this matters

Bond ratings affect municipal borrowing costs and investors’ perceptions of fiscal stability. A downgrade can increase the cost of future borrowing and may affect how rating agencies view long-term liabilities such as pensions and OPEB.

What’s next

Rodney recommended continuing current fiscal practices: maintaining reserves, prudent budgeting and continuing scheduled contributions to pension and OPEB funds. The Select Board discussed ways to support those efforts and asked staff to continue reporting on long-term liability reduction strategies and potential impacts on future projects.