The Township of Berkeley Heights maintained its Aa1 credit rating this year from Moody’s Investor Service, which lauded the Township’s “active management” of finances, as well as its ability to use grants to offset major infrastructure costs.
While the Township is benefitting from – and has more capability to – benefit financially from ongoing development and its wealthy tax bases, Moody’s said “finances continue to trend in a positive direction through active management over operations. Leverage is high driven by pension and OPEB. The township is very active in using grants to offset the cost of infrastructure projects to help moderate its long-term liabilities.”
“With all of the important capital needs facing our Township right now, our strong financial planning and out-of-the-box thinking on how to fund these projects has been recognized as a strength for Berkeley Heights,” said Mayor Angie Devanney. “This rating indicates that our credit is strong and investors can have confidence in us.”
While credit strengths include a very wealthy and “mature” local economy, as well as strong reserves built up over the last few years, credit challenges include the town’s above-average long-term liabilities driven by pension and OPEB liabilities.
“The township's financial position continues to improve as its management actively controls spending to ensure fiscal stability,” the Moody’s credit report states. “Unaudited fiscal 2022 results show an increase in fund balance to $10.2 million or 42% of revenues. Current reserves are at a six-year high and materially higher than fiscal 2017 when fund balance was just 18% of revenues.”
The Township has aggressively worked to build up its reserves the past couple of years through methods such as increasing the sewer connection fees for developers, ensuring all developers pay the appropriate permit fees before being able to build, and applying for more grants to help offset various project costs.
In the near-term, the township expects to authorize $2.5 million annually for routine infrastructure improvements. This number is based on a 6+-year projection the Town does with its capital expenditures each budget cycle, to better plan for upcoming capital needs. But the Township has increased the funding sources of these projects in recent years; instead of straight borrowing via the bonding process and increasing the town’s debt, the township has been actively leveraging grants, low-interest state loans, state and federal appropriations funding and internal funds to avoid issuing excessive long-term debt in the future. The township's management team actively works with county, state, and federal departments seeking grants.
“The township’s management team is very active in financial forecasting for both debt and finances to ensure its long-term trajectory is positive,” Moody’s said. “The township works with its financial advisors to update its capital projects and debt plan annually. Its active management is a positive credit attribute.”
Added Mayor Devanney: “This report and rating recognizes that Berkeley Heights is taking an active financial approach to reducing our debt and obtaining alternative sources of funds for large infrastructure projects. Whether that be through grants, or state or federal appropriations, we aren’t simply relying on the backs of our taxpayers to strengthen our community.”