For the fifth straight year, Standard & Poor’s Global Rating Services has assigned a AAA rating to Montclair’s series general obligation improvement bonds and series GO school bonds.
AAA is the highest possible rating that may be assigned to an issuer’s bonds. It helps lower the cost of borrowing for capital projects, which the township noted in an announcement about the rating thereby saves taxpayer dollars.
“Attaining a AAA rating for a fifth straight year is a truly remarkable achievement, especially given the global economic downturn that resulted from a worldwide pandemic,” Mayor Sean Spiller said in the announcement. “Our township firmly remains in the ranks of top communities nationwide for creditworthiness and fiscal management — a testament to our strong financial policies of the last several years. A top rating translates into millions of dollars in savings for taxpayers and affords us greater flexibility as we continue bonding to invest in our township and residents.”
The report from Standard & Poor’s cited Montclair’s strong management that was able to quickly implement several cost-saving measures to offset reductions in “more economically sensitive revenues as a result of the pandemic, limiting budgetary pressure in the near term,” the township said in the announcement.
Standard & Poor’s also cited Montclair’s historically conservative budgeting practices, remaining tax flexibility and growing reserves, the announcement said. Those are “factors that will continue to position the township on a strong financial footing and will mitigate concerns regarding longer-term rising pension and other post-employment benefit costs,” the announcement said.
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“Achieving Standard & Poor’s top rating for the fifth time in a row reflects the township’s stable financial position and validates our strong commitment to responsibly managing taxpayers’ money,” Deputy Mayor Bill Hurlock said in the announcement. “We must continue to focus on making sound financial decisions that will maintain the fiscal health of the township.”
In addition, the agency cited Montclair’s debt reduction policy, the announcement said. During the last eight years, Montclair’s debt was reduced from $223 million in 2012 to $165 million in 2020, it said.
“Clearly the township’s strong budgeting policies allow Montclair to maintain fiscal discipline,” Councilman David Cummings, who sits on the council’s committee along with the Spiller and Hurlock, said in the announcement. “We must continue our efforts to ensure the township’s financial well-being for years to come.”
Councilman Peter Yacobellis, in a separate statement, said he was proud Montclair maintained its strong credit rating even as revenues dropped, while keeping the township’s municipal tax increase to less than 2% “by really tightening the belt.”
“Unfortunately, revenues in 2021 are once again down considerably from 2019, which will force us to have to make tough choices again,” he wrote. “I believe strongly in ‘do no harm’ to our credit rating as any negative shift would immediately cost us more money in higher interest rates. But I also feel strongly that an excellent credit rating exists for a reason and like we do in our personal lives when we aim to get that good score and then use it to invest in things like a new home or vehicle, on the government side we absolutely must invest significantly in our schools, parks, libraries, transportation infrastructure and everything else that affects the quality of your lives and your kids lives. It’s about the present as much as it is the future.”
The township announcement said the ratings agency cited the following key factors:
- A very strong economy, with access to a broad and diverse metropolitan statistical area, but a high county unemployment rate exceeding 10%
- Strong management, with good financial policies and practices under S&P Global’s Financial Management Assessment methodology
- Adequate budgetary performance, with operating results that the agency expects could improve in the near term relative to fiscal 2020, which closed with a slight drawdown in the current fund in fiscal 2020
- Very strong budgetary flexibility, with an available fund balance in fiscal 2020 of 18% of operating expenditures
- Very strong liquidity, with total government available cash at 60.3% of current fund expenditures and 5.1x governmental debt service, and access to external liquidity the agency considers strong
- An adequate debt and contingent liability profile, with debt service carrying charges at 11.9% of expenditures and net direct debt that is 87.0% of general fund revenue, as well as low overall net debt at less than 3% of market value and rapid amortization, with 90.5% of debt scheduled to be retired in 10 years, but a large pension and other post-employment benefit obligation
- A strong institutional framework score.