NP Gets Low Interest Rate on Bond Sale

For 15 minutes on Thursday morning, all eyes in the third floor conference room of the New Providence Municipal Building were riveted to one wall.

On that wall was projected an online sale of $8,900,000 in General Obligation Bonds. By 11:15 a.m. the bidding was completed and the borough had a winning bid at 1.81 percent from Janney Montgomery Scott.

The rate is lower than one received last December by Princeton Township — which, like New Providence, has a AAA bond rating. Princeton sold its bonds at a 2.00 percent interest rate.

Borough leaders were extremely pleased with the result of the sale.

"There is a lot of hard work that went into this," said Mayor J. Brooke Hern, who cited the "great work" of CFO Ken DeRoberts "and all of our professionals that have given New Providence the AAA rating and allowed us to borrow a substantial amount at very low cost to taxpayers."

Hern noted that the bonds would translate into "capital improvements that would benefit the town for years."

Bids were received via the web. 

Bidders were only able to see the lowest bid and then bid lower if they so desired — they could not see the other bidders. However, town leaders and staff in the conference room could see all bidders and rates.

The bidding started slowly — but very promisingly with the first bid coming in at 1.98 percent.

"We're already below two percent!" said Borough Administrator Doug Marvin. Marvin accurately predicted that the last five minutes would be the most exciting as bidders finally started to outbid each other. One bidder lowered its bid four times — from 1.89 to 1.822 percent — in the last few minutes in an attempt to buy the bonds.

"We took advantage of a similar format with our last bond sale in 2006 and received favorable results," said Doug Marvin, Borough Administrator.

The borough recently received the AAA rating from Fitch and S&P. Marvin said the AAA rating clearly helped the borough achieve a very low interest rate on this bond issue.

Councilman Bob Robinson called it a "very exciting process." Robinson said that many deserved credit — from the current mayor and council, CFO DeRoberts and Borough Administrator Marvin to past mayors John Thoms and Al Morgan and Council President Michael Gennaro.

"It took 6 to 8 years to get to this interest rate," said Robinson, who also credited the residents of New Providence for supporting their elected officials.

Other elected officials present at the sale where Councilmen Rob Munoz and Armand Galluccio.

"This is awesome," said Borough CFO Ken DeRoberts. "It's an excellent interest rate that will save the taxpayers money, and it's all attributable to the policies of the mayor and the council."

More details are provided below in a release from New Providence Borough administration:

New Providence Earns AAA Bond Ratings

“Standard & Poor’s and Fitch Ratings have both assigned an ‘AAA’ rating to the Borough of New Providence for our $8,910,000 General Obligation (GO) General Improvement Bonds for 2012,” according to Mayor J. Brooke Hern. The bonds were auctioned on May 10 via a competitive on-line auction process. The low bidder for the 15-year bond was Janney Montgomery Scott at 1.818084%. “We are extremely pleased with the exceptional results of the bond sale which was positively impacted by the AAA ratings” said Hern. “I was also very pleased to learn that New Providence is one of only six municipalities nationwide that had their rating raised by Fitch in the past two years.”

According to the rating agency reports, these stellar ratings were driven by numerous factors:

• STABLE AND DIVERSE TAXBASE: The borough’s tax base has been stable the last five years with new growth offset by commercial appeals activity. Although primarily a residential tax base, the top ten taxpayers are diverse and include a number of major corporations.

• STRONG SOCIOECONOMIC INDICATORS: The borough benefits from its location within commuting distance of major employment areas. Residents are well- educated professionals and exhibit above-average wealth levels.

• STRONG FINANCIAL CONDITION: New Providence’s financial condition is very sound as a result of management’s prudent budgeting practices and maintenance of reserves for volatile expenditure items, such as snow removal and unanticipated tax appeals.

• DEBT LEVELS ARE VERY MANAGEABLE: Overall debt levels are moderate and manageable.

New Providence is a well-located community with above-average income levels. Located in Union County, it is 15 miles from downtown Newark and 28 miles west of New York City. The borough has a population of 12,171 and its residents are primarily working professionals who commute to nearby employment areas including Morristown, Newark and New York City. Income levels are above average, with 2010 median household income of $113,542 (168% of state and 227% of national levels) and per capita income of $53,564 (160% of state and 206% of national levels).

New Providence boasts a 2011 market value of $2.6 billion, translating into a high $209,576 market value per capita, additional evidence of the high wealth levels. The borough’s tax base has remained relatively stable the last five years, with new growth offset by tax appeals settlements, primarily with some of the borough’s corporate

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taxpayers as a result of the recessionary period the last few years. The top ten taxpayers represent a moderate 9.6% of the tax base and consist of a number of major corporations that have headquarters or executive offices in the borough. A thriving business community also contributes to the appeal of New Providence.

The borough has maintained its strong financial condition for the last five years as a result of conservative financial policies and budgeting practices. Current fund operations have been sound with ample fund balance levels maintained the last five years. The borough also prudently maintains special reserves pursuant to its financial policies.

The borough also boasts low debt levels with rapid amortization. Direct debt levels are low at 0.6% of market value and $1,214 per capita. Debt levels are more moderate with the inclusion of overlapping Union County and school district debt at 1.9% of market value and $3,948 per capita. Debt amortization, including the 2012 bonds, is rapid with 79% of par amortized in ten years. Scheduled debt service of $1.6 million in 2011 equaled a moderate 10% of operations. Debt service as a percentage of the borough’s budget is forecasted to remain level even with this new issue, since a large portion of the borough’s outstanding debt matures in 2013. Future capital needs are limited but include some capital and infrastructure needs, with debt likely to be issued in the next two years. Debt policies currently in place provide for rapid amortization and maintenance of level debt service costs, which also contributes to the favorable bond ratings.

“The excellent bond ratings that we received are a credit to the conservative fiscal policies developed by the Mayor and Council,” said Doug Marvin, Borough Administrator. “They have worked very hard to manage the borough’s finances in a responsible manner and are excellent stewards of our taxpayer’s money. These efforts have been acknowledged by the rating agencies and are reflected in the excellent result of our bond sale.”

“Fiscal discipline is a long term process, involving many in our community,” said Hern. “Credit for our exemplary bond ratings must be given to the efforts of our past and current council, the astute work of the council finance committee, and to our residents, who support fiscal responsibility” Mayor Hern said.