MADISON — The town has lost its biggest taxpayer, Madison Paper Industries, but a recent report gives the community a high credit rating and describes it as being financially stable because of good municipal management.

The credit rating showed improvement in the town’s credit score since 2007, something that Town Manager Tim Curtis said Thursday reflects the way Madison handled the announcement of the mill’s devaluation in 2014 and subsequent closure last month.

Tim Curtis

The report, issued May 31 from Standard & Poor’s, lists the town’s credit score as A plus, up from a BBB rating in 2007. While not the highest rating possible — that’s an AAA — it is an improvement that Curtis said is indicative of the community’s response to the closure of Madison Paper, which meant the loss of more than 200 jobs and the loss of thousands of dollars in tax revenue to the town.

“What affects your credit rating is how you handle adversity, not whether adversity comes,” Curtis said. “It’s really about how we handled the news of the mill closing, the loss of valuation in 2014 and a proactive approach to handling it.”

In 2013, the mill was assessed at $229.7 million and contributed more than $4 million in tax revenue, but that number dropped in 2014 when the mill was reassessed at a value of $80 million. Now Madison Paper pays $1.56 million in taxes.

“The stable outlook reflects what we view as management’s pro-activity in cutting the budget to offset substantial losses in revenue from the closing of the MPI mill,” wrote Anthony Polanco, a Standard and Poor’s analyst, in the report. Polanco did not return a call seeking further comment Thursday.

An A rating is the third-highest of 10 possible long-term credit scores and indicates that while the town is more susceptible to adverse changes in economic conditions than higher-rated agencies, its capacity to meet financial obligations is still strong, according to the Standard and Poor’s website. A plus indicates Madison’s A rating is at the high end of that range.

The report also indicated that the town’s financial outlook is stable and is not expected to change within the next two years.

The recent credit report was sought as part of a re-issuance of a $3 million bond the town took out on behalf of tomato grower Backyard Farms in 2007 to help build transmission lines to the commercial greenhouse. Backyard Farms is responsible for the bond payments, which are made through the town, and the re-issuance will generate a roughly 10 percent savings on the remaining money due, Curtis said. The last bond payment is due in April 2027.

Located on River Road in Madison, Backyard Farms first opened in 2007 with a 25-acre greenhouse and expanded in 2009 with the addition of an 18-acre greenhouse. The company employs about 200 people and is valued at about $40 million, according to Curtis. It pays about $800,000 in taxes annually — about half the amount that Madison Paper contributes.

“Even though Backyard Farms is now our largest employer, you really can’t compare the two,” Curtis said.

One of the biggest challenges facing communities that have seen a recent loss in tax value — including at paper mills around the state — comes in getting the state to recognize the loss when it distributes education funds, said Bill Van Tuinen, an industrial appraiser and former town assessor in Madison. State educating funding is calculated by a combination of student enrollment and property values over a three-year period.

The state’s “sudden and severe” statute distributes additional funding to communities that have seen a large drop in tax value because of the closure of a single business, but it does not recognize a change in assessment as a qualifier for additional funding. “That’s really one of the biggest obstacles, is the town has to continue to pay for education services based on valuation that no longer continues to be in the local tax base,” Van Tuinen said.

He said Madison probably will qualify for additional funding under the statute, and in the meantime school officials received word last month that they will qualify for an additional $585,000 from the state under L.D. 1699, a bill that was introduced by Gov. Paul LePage and sponsored by Sen. Rod Whittemore, R-Skowhegan.

In general, Van Tuinen said, Madison operated in a financially responsible manner even before the mill’s closure.

“It’s not like they banked on the valuation of the paper mill to pay off several million dollars of debt and that valuation is no longer there to pay off the debt,” he said.

In order to stabilize the tax rate after the 2014 loss, the Board of Selectmen in Madison came up with a plan that was approved by voters in a special town meeting and included the use of an additional $800,000 in surplus to fund the 2014-2015 budget and the establishment of a $2.5 million line of credit. Voters at the town meeting that year also approved the use of $600,000 in surplus funds to lower the tax rate.

In 2015, voters approved a plan to consolidate the Madison Police Department with the Somerset County Sheriff’s Office for an annual savings of about $90,000 in the municipal budget.

Madison-based School Administrative District 59 also presented voters with a 4 percent decrease in the 2015-2016 budget and this year offered a less than 1 percent increase.

“All of those things were proactive steps to deal with the loss of valuation at the mill,” Curtis said. “That’s one of the reasons why Madison was deemed to be in a fairly stable financial situation.”

Rachel Ohm — 612-2368

rohm@centralmaine.com

Twitter: @rachel_ohm

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