Canton, Massachusetts · Saved source text
AAA Bond Rating May 2024
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Summary: Canton, Massachusetts; General Obligation Primary Credit Analyst: Melissa Stoloff, Boston (1) 617-530-8030; melissa.stoloff@spglobal.com Secondary Contact: Michael Ryter, Chicago +1 312 233 7016; michael.ryter@spglobal.com Table Of Contents Credit Highlights Outlook Related Research WWW.STANDARDANDPOORS.COM/RATINGSDIRECT MAY 14, 2024 1
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Summary: Canton, Massachusetts; General Obligation Credit Profile US$5.515 mil GO mun purp loan bnds ser 2024 dtd 06/06/2024 due 06/01/2044 Long Term Rating AAA/Stable New Canton Twn GO Long Term Rating AAA/Stable Affirmed Credit Highlights • S&P Global Ratings assigned its 'AAA' rating to the Town of Canton, Mass.' $5.5 million series 2024 general obligation (GO) bonds. • At the same time, we affirmed our 'AAA' rating on the town's existing GO debt. • The outlook is stable. Security Canton's full-faith-and-credit pledge, subject to Proposition 2 1/2 limitations, secures the bonds. We rate the limited-tax GO debt on par with Canton's general creditworthiness because the ad valorem tax is not derived from a measurably narrower property tax base and there are no resource fungibility limitations, supporting our view of its overall ability and willingness to pay debt service. Bond proceeds will complete financing for the library roof and water main replacement projects, along with financing various other capital needs. Credit overview Canton's credit profile is stable and robust, demonstrated by tax base expansion and a proactive management environment that supports positive financial results and healthy reserve levels in line with state peers. The local economy is supported by a stable property tax base and its assessed value continues to grow due to a healthy real estate market, even among an increased mortgage rate environment and tempering demand across the regional economy. TopGolf opened its first Massachusetts location in Canton in November 2023, which is anticipated to result in ongoing commercial activity and a financial boost for the town given increasing meals tax revenue. The town is also in its second year of a 30-year PILOT agreement with Point32Health following the company's acquisition of the former Reebok headquarters property in 2020, providing another source of long-term revenue stability. Canton's finances are already very stable given it has posted nine consecutive years of surpluses and did so again in fiscal 2023; fiscal 2024 year-to-date results are tracking positively with about one month remaining in the fiscal year; therefore we anticipate another surplus result. Canton's solid financial performance has further supported its ability to maintain or improve its reserve position, as demonstrated by the town adding $3 million to available reserves in fiscal 2023. The town's reserves are slightly above medians (about 22% of expenditures) for state peers. Officials have also maintained about $1.7 million in unused levy capacity and do not foresee increasing the levy to the full amount until fiscal 2030 to help WWW.STANDARDANDPOORS.COM/RATINGSDIRECT MAY 14, 2024 2
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Summary: Canton, Massachusetts; General Obligation support the upcoming middle school construction project. Canton will have $60 million in total debt after this issuance and maintains a negligible debt burden with very low debt service costs. In addition to its regular issuances for various capital needs, officials are planning to bring its middle school project before voters for project authorization at the end of 2024; if voters approve the project, the town will likely begin issuing bond anticipation notes next summer with permanent financing not expected until fiscal 2030. The project is estimated to cost about $230 million, with the town's share expected to be about $150 million, and most likely would seek voter approval for a debt exclusion from Proposition 2 1/2 limitations. While the expected debt issuances will likely result in weakened debt metrics, we believe management's comprehensive and forward-looking debt planning, which includes setting aside funds into a capital stabilization account to cover some of the projected debt service costs and maintaining flexibility in its unused levy capacity until it plans to permanently finance the project, mitigates downward rating pressure. In addition, Canton's large pension and other postemployment benefit (OPEB) obligation remains a credit weakness given our expectation that costs will escalate as the pension system works toward full-funding by 2029, but management's pre-funding of its OPEB obligations, with an annual contribution increase, and plan to redirect pension assessment savings toward the OPEB liability somewhat mitigates this weakness. The 'AAA' rating further reflects our opinion of the town's: • Primarily residential economy (76% of assessed value) characterized by above-average wealth and income levels and participation in the greater Boston regional economy; • Forward-looking financial planning, highlighted by formal five-year budget forecasting and capital planning, and adherence to the informal fund balance target minimum of 15% of expenditures, coupled with a strong institutional framework score; • Robust financial results supported by a primarily property-tax funded budget (73% in fiscal year 2023), which also contributes to Canton's maintenance of very strong reserves; and • Minimal debt profile with medium-term plans to begin funding the middle school construction projects, along with a large pension and OPEB obligation ($138 million total). Environmental, social, and governance We assessed Canton's environmental, social and governance risks relative to its economy, management, financial measures, and debt and liability profile and found them neutral in our credit rating analysis. Outlook The stable outlook reflects Canton's positive financial performance and very strong reserve levels that we expect will be maintained based on fiscal 2024 year-to-date results, further supported by comprehensive long-term planning and a robust property tax base. Downside scenario We could lower the rating if finances were to come under pressure and deteriorate significantly, whether due to unanticipated circumstances or increasing retirement contributions, leading to a material and sustained draw on WWW.STANDARDANDPOORS.COM/RATINGSDIRECT MAY 14, 2024 3
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Summary: Canton, Massachusetts; General Obligation
reserves.
Rating Above the Sovereign
We rate Canton higher than the nation under our criteria "Ratings Above The Sovereign--Corporate And Government
Ratings: Methodology And Assumptions" (published Nov. 19, 2013) because we believe the town can maintain better
credit characteristics than the nation in a stress scenario based on its predominantly locally derived revenue base and
our view that pledged revenue supporting bond debt service is at limited risk of negative sovereign intervention.
Canton, Massachusetts--key credit metrics
Most recent Historical information
2023 2022 2021
Very strong economy
Projected per capita EBI % of U.S. 158 163 174
Market value per capita ($) 313,178 283,717 252,100 237,418
Population 24,295 23,566
County unemployment rate(%) 3.3
Market value ($000) 7,608,655 6,892,909 6,124,774 5,595,001
Ten largest taxpayers % of taxable value 9.7
Strong budgetary performance
Operating fund result % of expenditures 3.1 1.8 5.1
Total governmental fund result % of expenditures 1.4 2.6 5.7
Very strong budgetary flexibility
Available reserves % of operating expenditures 24.8 23.6 23.9
Total available reserves ($000) 29,769 26,469 26,952
Very strong liquidity
Total government cash % of governmental fund expenditures 45 42 32
Total government cash % of governmental fund debt service 1236 1082 738
Strong management
Financial Management Assessment Good
Very strong debt & long-term liabilities
Debt service % of governmental fund expenditures 3.6 3.9 4.3
Net direct debt % of governmental fund revenue 24
Overall net debt % of market value 0.5
Direct debt 10-year amortization (%) 73
Required pension contribution % of governmental fund expenditures 5.0
OPEB actual contribution % of governmental fund expenditures 3.9
Strong institutional framework
EBI--Effective buying income. OPEB--Other postemployment benefits. Data points and ratios may reflect analytical adjustments.
WWW.STANDARDANDPOORS.COM/RATINGSDIRECT MAY 14, 2024 4Source page 5
Summary: Canton, Massachusetts; General Obligation Related Research Through The ESG Lens 3.0: The Intersection Of ESG Credit Factors And U.S. Public Finance Credit Factors, March 2, 2022 Ratings Detail (As Of May 14, 2024) Canton Twn GO Long Term Rating AAA/Stable Affirmed Canton Twn GO Long Term Rating AAA/Stable Affirmed Canton Twn GO Long Term Rating AAA/Stable Affirmed Canton Twn GO Long Term Rating AAA/Stable Affirmed Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.spglobal.com/ratings for further information. Complete ratings information is available to RatingsDirect subscribers at www.capitaliq.com. All ratings affected by this rating action can be found on S&P Global Ratings' public website at www.spglobal.com/ratings. WWW.STANDARDANDPOORS.COM/RATINGSDIRECT MAY 14, 2024 5
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