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Bond counsel urges delay: audit lag could hinder Biddeford bond sale
Summary
Bond counsel Joseph Ketera told the council the city should delay coming to market for bonds until audits are current; he warned rating agencies may withdraw ratings when financial statements are not up to date and outlined options including negotiated sales, bid sales and bond banks.
Bond counsel Joseph Ketera advised the Biddeford City Council Aug. 4 to hold off on new bond sales until the municipality has current audits and financial information available.
Ketera walked councilors through interest-rate markets, two sale methods (negotiated sale versus public bid), statutory limits on maturities and the rating process. He said rating agencies have been withdrawing or withholding ratings when issuers do not have current financials, which can cause insurance companies and investors to shy away from an issue or to withdraw credit support.
Ketera said the city has experienced audit lag, that Moody's and Standard & Poor's have tightened requirements and that the practical result can be an inability to obtain a market rating. "They are... pulling the rating," Ketera said, explaining rating withdrawals tied to lack of sufficient current financial information and urging the city to have 2025 and 2024 audits in hand before attempting a sale.
He also described bond anticipation notes (BANs) and legal constraints around their term, saying the current interpretation limits BANs to three years in practice and that repeated short-term rollovers increase interest costs. Councilors asked about alternatives, and Ketera recommended preparing current audits, strengthening management reporting and, if necessary, delaying issuance until the market and documentation are aligned.
