Norwalk secures $53 million bond sale at 3.69% but officials warn fund balance pressures could threaten rating

Norwalk officials said the city completed a $53 million general-obligation bond sale on Sept. 3 that drew an unusually large field of bidders and resulted in a 3.69% interest rate, while S&P and Moody's reaffirmed the city's AAA credit rating.

The outcome matters because lower borrowing costs reduce the long-term interest burden on taxpayers; but finance staff told the Common Council that the city's fund balance has been drawn down in recent months and that further draws could put the AAA rating at risk and raise future borrowing costs.

Mister Schmidt, a finance department staff member, said the sale attracted 15 bids — "the greatest number that I've ever been a part of" — which contributed to the low rate. He told the council, "The total sale was $53,000,000 in GO bonds," and said the low rate reflected strong investor demand as well as the city's fiscal management. Bill Lindsey, the city's financial adviser from UniStat, coordinated the market work, the presentation to rating agencies and the official statement that underpinned the sale.

Council members and staff credited the late Council Chair Greg Burnett for long-term fiscal stewardship that helped secure investor confidence. Council member Frayer told the council the favorable pricing was "a tribute to the late chairman of the finance and claims committee, Mister Burnett," and several council members echoed that sentiment.

But Mister Schmidt cautioned that the city's fund balance — the rainy-day reserve used to smooth unexpected shortfalls — will face pressure when FY25 closes. "The FY25 budget had $8,000,000 of a drawdown in it, and we're going to have to draw down that $8,000,000," he said. He said staff was projecting about a $3,000,000 deficit for FY25 that would increase the draw to roughly $11,000,000. "We're at about $86,000,000" in fund balance before FY25, he said, and that level is likely to drop to about $75,000,000 by close of the books.

Mister Schmidt explained the ratings agencies monitor fund balance on a GAAP basis and look for a roughly 20% cushion relative to the overall budget. "It keeps us just a hair above that 20% threshold," he said, and added that falling below the threshold would not automatically trigger a downgrade but would raise the risk of a negative outlook. He warned that any downgrade could increase borrowing costs — "hundreds of thousands to potentially millions of dollars over the period of the bonds," he said.

Council members asked for details and for staff to continue monitoring. When Council member Sarah asked for more detail on the fund-balance projection, Mister Schmidt provided the figures above and said staff would know the final FY25 deficit when the books close. Mayor Harry W. Rilling praised staff work and said the city is pursuing multiple revenue and control measures, including a tax-sale process enabled by recent state legislation and vehicle-registration compliance efforts to recover uncollected revenue.

Officials also pointed to positive signs: public-development activity and a strong showing of bidders in the sale. "Getting 15 bids when we normally would get maybe [fewer] is a real feather in our cap," Mister Schmidt said.

The council heard no motion requiring a vote on the bond sale; the sale and the accompanying AA A rating affirmation were reported to the council for information and oversight. Staff said they will continue to report progress and that close monitoring of revenues and conservative budgeting remain a priority.

Looking ahead, finance staff said they will track FY25 closing results and the early FY26 revenues closely and report back to the council if conditions change. "These are cautious times," Council member Frayer said, and staff urged preserving internal fiscal controls to maintain the city's credit standing.