Montclair Gets Upgraded to AAA Rating From Standard and Poor’s (UPDATED)

Montclair Gets Upgraded to AAA Rating From Standard and Poor's

Updated with official announcement from the township below.

Montclair’s fiscal health continues to improve. Last night, Montclair Mayor Robert Jackson said Montclair had just been given a AAA rating — the highest possible ranking — from Standard and Poor’s, mentioning the news at a launch party for the Montclair Jazz Festival.

The news ranks Montclair among an elite group of towns like Princeton who have attained the highest rating.

Back in 2014, Montclair had gone up from AA- to AA+.

“This is fantastic news and is something Mayor Jackson and I have strived for these last four years,” says Deputy Mayor Bill Hurlock. “It will save our Town a tremendous amount of money on our debt service going forward.”

S&P Global Rating Services announced today that it raised its long-term and underlying ratings on Montclair Township’s existing general obligation (GO) debt to “AAA” – the highest issuer credit rating the financial services company assigns. The rating represents an upgrade from the AA+ the company issued the Township in 2014.
S&P’s report cites Montclair’s ability to “consistently achieve stable financial performance supporting its very strong liquidity and strong budgetary performance and flexibility.”

The company also assigned a “AAA” long-term rating and underlying rating on the Township’s existing GO debt and stated that the outlook on all of the Township’s ratings is stable.

“This new rating increase places Montclair in the ranks of the top communities nationwide for credit worthiness and fiscal management,” said Mayor Robert Jackson. “It is an affirmation of the hard work and responsible management of taxpayers’ finances through efficient and effective fiscal policies set in place from the very beginning of this Council’s tenure. “I am truly grateful to S&P for this unprecedented vote of confidence in the Township of Montclair. My Council colleagues, Manager Stafford, CFO Rao, and Township staff deserve the credit; I’m proud of them.”

Only 3% of New Jersey’s 565 municipalities have the “AAA” rating. The current increase marks the third upgrade of the Township’s rating since 2012.

According to the report, the “AAA” GO rating reflects S&P’s assessment of the following credit factors, specifically the Township’s:

·Very strong economy, with access to a broad and diverse metropolitan statistical area (MSA);

·Strong management, with “good” financial policies and practices under S&P’s financial management assessment (FMA) methodology;

·Strong budgetary performance, with an operating surplus in the general fund in fiscal 2015;

·Strong budgetary flexibility, with an available fund balance in fiscal 2015 at 11.0% of operating expenditures;

·Very strong liquidity, with total government available cash at 28.2% of general fund expenditures and 2.7x governmental debt service, as well as access to external liquidity S&P considers strong;

· Strong debt and contingent liability position, with debt service carrying charges at 10.5% of expenditures, net direct debt at 88.5% of general fund revenue, and low overall net debt at less than 3% of market value and rapid amortization, with 78.4% of debt scheduled to be retired in 10 years; and

· Strong institutional framework score.

“The AAA rating is the testament to policies put in place by the governing body to place the township on a solid financial footing for now — and for the long term,” said acting Township Manager Timothy Stafford. “It reaffirms the efficacy of Council’s continued focus on making smart financial decisions which help strengthen the local economy, making the community a desirable place to live, work and do business.”

The full S&P Global Rating Services report is available for download here https://orl.me/wU3itK.

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11 COMMENTS

  1. Good news, but some reasons from S&P would be helpful. I hope analysts aren’t just capitalizing increased revenues from next year’s property reappraisal (which will likely increase Town revenues)

  2. Elcamino, the property reappraisal does NOT increase the amount of money the town collects in property taxes- it adjusts how the total amount is distributed over all of the properties within the township.

    Only increasing the dollar amount of the tax levy does that.

  3. How many years have I heard these tales of downplaying the re-appraisal game? Most homeowners will see a bump in their property taxes. Start budgeting now. “Winter is coming.”

  4. Congratulations to the mayor and town council for their efforts. as others noted, el camino, you are completely wrong about revaluation. Pie stays the same. Just readjusts the rate to market conditions. Required by law.

  5. What pie are you counting? Does it include commercial, too?

    Because if you look the $ amount of the last 3 years of successful appeals, you might think there is no rule that residential has to come out to the same $ total post-reval…at least the little I know.

  6. Ah, silly me. I did read the mayor saying that the tax rate will fall if average appraised value is higher than last appraisal but I didn’t believe it-I am not accustomed to governments saying no to larger pie. Is Town bound by state law to keep pie constant or do we just count on them to keep promise?

  7. I’m sure I’ll be corrected if I’m wrong here.

    The town is somewhat constrained regarding their ability to increase revenues year over year. If they take in $100 million this year, then reval property, they don’t get to take in $120 million the next year without having to propose and approve a 20% tax increase. The rate is based on the budgeted revenue, not the other way around.

    What will change is how much each property owner (residential or commercial) pays to get up to the $100 million figure. For me, my taxes have both gone up and down as a result of these adjustments.

  8. “The town is somewhat constrained regarding their ability to increase revenues year over year.” Didn’t property taxes almost double over a decade? (before my time). I believe they just need Council approval, not voters’ or states. They don’t seem very constrained at all, in general, but perhaps in case of reappraisals they are.

  9. Technically, they are limited to a 2% property tax increase per year, with some complicating rules and exceptions that allow them to exceed that amount.

    However, none of those exceptions allow for total taxes to go up as a direct result of the reappraisal. They should be adjusting the rate to a net zero revenue change, then applying any uplifts as a tax increase, subject to the 2% cap.

  10. I’m willing to pay my fair share of property taxes, but I’m mystified at how appraisal/reval numbers are arrived at. For instance, in my neighborhood there is a house built the same year as mine which is substantially larger than mine, its lot is nearly 3 times as large, and on that pretty lot are both a pool and a tennis court (I have neither). That house is “done”–not remotely a fixer-upper. The tax bill? Not much higher than mine. Another house in the neighborhood (bigger house, bigger lot, pool, etc.) just sold for a truly eye-popping number–probably twice as much as my house would sell for–and its taxes are LOWER than mine by several thousand dollars. Doubtless that tax bill will go up in the next reval, but I think there is something wrong here! (And when I tried appealing my taxes, I got turned down.)

  11. oliver that’s what the reevaluation seeks to address – if someone has a home that is the same size as yours or larger or sold for a lot more than the tax bill has been a lot lower than they would get adjusted upward or you will get adjusted downward, etc.. Goal is to tax similar valued homes at the same amount as opposed to having a home worth $1.5MM paying $50,000 and another paying $35,000.

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