Montclair Earns ‘AAA’ Bond Rating For 5th Year In A Row

MONTCLAIR, NJ — Make it five in a row for Montclair.

For the fifth straight year, Standard & Poor’s Global Rating Services assigned an “AAA” rating – the highest possible – to Montclair Township’s series general obligation (GO) improvement bonds and series GO school bonds.

The agency also affirmed its AAA rating on Montclair’s existing GO debt, and cited the town’s outlook as “stable.”

Why should you care? According to Montclair town officials, the rating helps lower the cost of borrowing for capital projects, saving taxpayer money.

The report cited Montclair’s “strong management,” which was able to 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.”

According to a release from town officials:

“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 $223 million in 2012 to $165 million in 2020.”

“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.

“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,” Spiller added. “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.”

Some highlights of the agency’s assessment included:

• “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”
• “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,” Deputy Mayor William Hurlock said.

Councilman David Cummings, who sits on the municipal finance committee along with Spiller and Hurlock, also praised the latest rating.

“Clearly, the township’s strong budgeting policies allow Montclair to maintain fiscal discipline,” Cummings said. “We must continue our efforts to ensure the township’s financial well-being for years to come.”

Councilman Peter Yacobellis also said the latest rating was good news. But he added a caveat that "revenues are down" this year:

"I’m very proud that we were able to achieve this incredible feat this year given how dramatically revenues have plummeted over the last year, and also keep our municipal tax increase to under 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. 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. Its about the present as much as it is the future."

Send local news tips and correction requests to eric.kiefer@patch.com

Sign up for Patch email newsletters. Learn more about posting announcements or events to your local Patch site. Don’t forget to visit the Patch Montclair Facebook page.