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Posted on: June 19, 2020

Berkeley Heights’ Credit Rating Stands Despite Potential Economic Downturn in NJ

Moodys

Moody’s Investors Service has assigned a MIG 1 rating to the Township of Berkeley Heights

“We are very proud to have received the highest rating given by Moody’s, a MIG 1, using their rating system to gauge the risk of municipal bonds and the creditworthiness of the issuer,” said Berkeley Heights Chief Financial Officer Eugenia Poulos. “This is very important during normal times, and more so during the present pandemic, in order to provide us with more opportunities for financing in the municipal bond market.”

In addition, Moody’s also affirmed the Township’s Aa1 GOULT rating. The MIG 1 rating is for NJ’s $24 million Bond Anticipation Note, Series 2020A (non-callable) and $10.5 million Bond Anticipation Note, Series 2020B (callable). Investors look at this rating for their risk of the investment. That means Berkeley Heights should be able to attract good banks and investors bidding on the bans, hopefully at good rates with good premiums. This is great news for the Township, particularly during a global health pandemic that has risked the financial futures of many other towns throughout the United States.

“Despite the impact of the pandemic, the Township’s financial position will remain strong in the medium term as management continues to budget conservatively,” Moody’s said in its credit opinion.

“In light of the quarantine, the township completely revised its 2020 budget, cutting anticipated revenues, increasing the reserve for uncollected taxes, reducing property taxes, and raising additional revenues from other line items. In addition, the township has reduced appropriations. Favorably, the May quarterly tax bill collections actually came in stronger than last year. The net result is we expect the township’s finances to remain stable even during the pandemic.”

“Given the fact that we are navigating our way through a global health pandemic and many towns throughout New Jersey have an uncertain financial future as a result, we are very satisfied with this rating,” said Mayor Angie Devanney. “Our redevelopment is continuing, businesses continue to put in applications to set up shop in Berkeley Heights, we are increasing revenue streams, and we have added stability to our revenues and finances overall in the past two years. Because of all of these efforts, Berkeley Heights is on much more stable financial footing heading into our future.”

The Details

The Aa1 GOULT rating reflects the Township’s substantial tax base, solid wealth levels, and strong finances, all of which are expected to remain healthy despite the impact of MIG1the pandemic.

The MIG 1 short-term rating reflects the township’s strong fundamental credit quality, reflected in its Aa1 long- term credit rating, adequate liquidity and an established record of market access.

Despite the Coronavirus outbreak, which is considered a “a social risk” by Moody’s given the substantial implications for public health and safety, “we do not see any material immediate credit risks for Berkeley Heights.”

The two items identified that could lead to an increased credit rating for the Township to a Aaa – which is one step above where we currently are, include: sustained increases in reserves (GOULT); and reduction in long-term liabilities (GOULT).

To that end, in the past two years, the following activities have been taking place to help the Township build up reserves, establish solid revenue streams, and otherwise add stability to our finances – all of which were considered in the Moody’s rating:

  • Pushing forward all planned redevelopment projects – none of which have indicated significant anticipated delays, even after the onset of the COVID-19 health pandemic;
  • Continued interest from businesses to establish operations in Town;
  • Redevelopment plans by The Connell Co. to build a live-work-play community on their property, which would include retail;
  • Reviewed our sewer connection fees, which resulted in an increase in fees, that will directly impact fees generated from all new development;  Aa1
  • Actively seeking 0% interest loans from the New Jersey Infrastructure Bank for more capital projects involving our sewer system;
  • Reviewed our debt and introduced long-term financial planning;
  • Encouraging our department heads to work on six-year capital plans;
  • Applying and using grants whenever possible, and budgeting for them appropriately;Working with our department heads on better budgeting for the future, controlling our expenses and trying to build up our reserves whenever possible;
  • We are a frequent market participant and have issued short-term notes in each of the last five years - it has been our practice to sell refunding notes with adequate time before note maturity.  

“We are working diligently to ensure the financial stability of our Township’s future,” said Mayor Devanney. “Had we not been taking these steps in recent years, and properly planning for a positive long-term fiscal outlook, Berkeley Heights would not be in the great place it is now during this pandemic."

Click here to read the press release from Moody’s


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