Montclair Achieves AAA Rating Fifth Year in a Row

Montclair, NJ – 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.”

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4 COMMENTS

  1. I am extremely impressed and appreciative of the strong financial performance our Township government has turned in this year. The collective scope of their achievements – the AAA rating, a fiscally strong 2021 municipal budget, a praise worthy annual audit review and the completion of multiple long-term labor agreements – reflect a level of organizational excellence unsurpassed among our municipal peers.

  2. First, I think I was very fair in crediting Township government overall. If the Council is not part of that, my apologies to the Council.

    Now, you know the Council sets economic policy & priorities. The execution is by the employees.

    Second, the Mayor has 1 vote as do the 6 other members.

    If you want fairness, especially with your knowledge, then lets recognize the former Council and the current paid contractors.

    And let me recognize the registered voters that voted, and gave the former Council and this Council a mandate to pursue fiscally responsible policies…relegating Councilor positions on other issues to tertiary importance.

  3. If we really want to give credit where credit is due let’s applaud the residents of Montclair for their ability and tolerance for being taxed. The #1 criteria for a AAA bond rating is the wealth and income of the municipality’s taxpayers. Fiscal responsibility plays a role but it is the ability to tax and have those taxes paid is where the AAA rating lies. Congratulation to the Montclair homeowners for being willing to pony up. The moral of the story is the more you are willing to pay the more you save!!! Anyone want to buy a bridge??