Topsfield’s formalized financial policies lead to higher bond rating

A state Community Compact grant helped Topsfield formalize its financial policies and achieve better financial forecasting, which resulted in a higher bond rating.

As a result, the town will see lower interest rates for a town hall renovation and addition, school roof projects, and a water treatment plant.

The town signed a Community Compact agreement in February 2016 to adopt financial management best practices in the areas of financial policies, fiscal forecasting, and capital improvement planning.

Topsfield used its $35,000 grant to hire consultants from the Edward J. Collins Center at the University of Massachusetts Boston. The consultants worked in concert with a working group coordinated by Town Administrator Kellie Hebert and including current Board of Selectmen Chair Mark Lyons, Finance Committee Chair Karen Dow and Vice Chair Jon Guido, Town Accountant Catherine Gabriel, and Treasurer/Collector Barbara Michalowski.

The resulting policies, adopted by the Board of Selectmen and Finance Committee, were cited by Standard and Poor’s when it issued an AA+ bond rating for the town’s borrowing of $19.1 million for the town hall and school roof projects.

Standard and Poor’s noted that the town’s new five-year financial plan expands in both detail and scope compared to previous plans. The agency also cited the improvement in Topsfield’s capital improvement plan, with identification of funding sources, and how the financial and capital plans are used, along with financial forecasting, as the basis of the town’s budget process.

The credit agency wrote that it could raise the town’s rating further, “if Topsfield’s management continues to update the documents produced in conjunction with the Collins Center, leading to increased budgetary performance and reserves, while managing expense growth and budgetary pressure associated with its long-term liabilities.”

As only the second town administrator in the town’s history – the position was established in 2005 – Hebert said it was apparent after her arrival in 2013 that the Finance Committee was undertaking the bulk of the budgeting work.

“There was a lot of hard work being done, but it really wasn’t ever captured in a formal document every year that we could look at and say, ‘OK, that’s why we can’t go for override after override,’” she said. “The advantage of the Collins Center in their approach was, ‘We’re not judging you – just to formalize what you already have and strengthen that.”

Lyons, a former longtime Finance Committee chair, said that developing the policies was really a “compilation” of the work that had been done over the years, while making sure all town officials are working from the same set of principles and practices when it comes to budgeting and finance.

“In town government, I always think it’s kind of like a medieval situation with fiefdoms – elected officials to the left and appointed officials to the right, a myriad of somewhat linked boards and committees,” he said. “Some people that start attending meetings and look at town government think it’s a top-down corporate model, and it’s not at all.

“This allows us to take things well done but done by different folks and get that unified to a large extent.”

Lyons said the financial policies allow consistency in budget and financial practices, ensuring that when there’s turnover on boards or in town departments, those practices are not lost along with the institutional knowledge held by previous town employees.