For the fourth 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. 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 once again, particularly during a major global recession, is truly an exceptional achievement,” said Mayor Spiller. “It maintains Montclair’s position in the ranks of the top communities nationwide for credit worthiness and fiscal management and is a testament to the Township’s strong financial policies of the last several years. This translates into savings for every resident and helps with the funding challenges associated with the current pandemic.”
Due to the economic consequences of the ongoing COVID-19 pandemic, rating agencies have been reducing many local governments’ current ratings. Montclair entered the national recession from a strong position – a result of several consecutive years of surpluses that have boosted the Township’s reserves.
“Despite the added pressures from the pandemic, S&P’s affirmation of the rating shows the agency’s confidence in the Township’s financial strength,” said Robert Benecke, Montclair’s Financial Advisor.
The Township’s management team quickly implemented a number of expenditure-saving actions to offset lower revenues which resulted from state-mandated stay-at-home measures. These actions limited budgetary pressure in the near term.
Standard & Poor's cited the Township's historically conservative budgeting practices, remaining tax flexibility, growing reserves – factors that will continue to position the Township on a strong fiscal footing – as some of the reasons the agency once again awarded Montclair its highest rating. 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 $164.6M in 2019 and an estimated $161M by the end of 2020, totaling $62M in debt reduction.
Below are the highlights of the rating agency’s assessment of key areas. The long-term rating reflects S&P’s assessment of the following factors for the Township:
- Very strong economy, with access to a broad and diverse metropolitan statistical area (MSA);
- Strong management, with good financial policies and practices under our Financial Management Assessment (FMA) methodology;
- Strong budgetary performance with an operating surplus in the current fund in fiscal 2019, notwithstanding some potential near-term risks from the ongoing COVID-19 pandemic and recession but with expectations of continued surpluses;
- Very strong budgetary flexibility, with an available fund balance in fiscal 2019 of 19% of operating expenditures;
- Very strong liquidity, with total government available cash at 41.5% of current fund expenditures and 3.7x governmental debt service, and access to external liquidity we consider strong;
- Adequate debt and contingent liability profile, with debt service carrying charges at 11.2% of expenditures and net direct debt that is 86.1% of current fund revenue, as well as low overall net debt at less than 3% of market value and rapid amortization, with 87.1% of debt scheduled to be retired in 10 years.
- Strong institutional framework score.
“Achieving this prestigious rating once again demonstrates that the Township manages taxpayers’ money responsibly,” said Deputy Mayor, William Hurlock. “It also reaffirms the efficacy of a continued focus on making smart financial decisions which allow us to weather the current economic storm created by the ongoing pandemic.”
“The current council will continue with the same strong policies around budgeting, to allow Montclair to maintain fiscal discipline,” added Councilor David Cummings, who sits on the Finance committee along with the Mayor and Deputy Mayor.