For the fifth straight year, Standard & Poor’s Global Rating Services assigned a AAA rating to Montclair Township’s series general obligation (GO) improvement bonds and series GO school bonds. The agency also affirmed its AAA rating on the Township's existing GO debt. The agency also cited the Township’s outlook as stable.
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 thereby saving 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,” said Mayor Spiller. “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 cites Montclair’s strong management which 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.”
Standard & Poor's also cited the Township's historically conservative budgeting practices, remaining tax flexibility, growing reserves – 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 (OPEB) costs. In addition, the agency cites the Township’s continued debt reduction policy – during the last eight years, Montclair’s debt was reduced from $223M in 2012 to $165M in 2020.
Below are the highlights of the rating agency’s assessment of key areas.
Very strong economy, with access to a broad and diverse metropolitan statistical area (MSA), but a high county unemployment rate exceeding 10%;
Strong management, with good financial policies and practices under S&P Global’s Financial Management Assessment (FMA) 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;
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 OPEB obligation; and
Strong institutional framework score.
“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,” said Deputy Mayor, William Hurlock. “We must continue to focus on making sound financial decisions that will maintain the fiscal health of the Township.”
“Clearly the Township’s strong budgeting policies allow Montclair to maintain fiscal discipline,” added Councilor David Cummings, who sits on the Finance committee along with the Mayor and Deputy Mayor. “We must continue our efforts to ensure the Township’s financial well-being for years to come.”