By Mark Rosman
UPPER FREEHOLD – Municipal officials have been informed that Upper Freehold Township has joined the select ranks of New Jersey municipalities that have achieved an AAA rating from a credit rating agency.
Township Administrator and CFO Dianne Kelly said Standard & Poor’s Global (S&P) has upgraded the rating for Upper Freehold Township from AA to AAA. She said S&P upgraded the municipality by two levels from its previous rating.
“A two-step jump demonstrates how financially strong our municipality is. The AAA rating is the highest available from S&P, the equivalent of a perfect credit score,” Kelly said. “This coveted rating allows us to join the elite group of approximately 25 other municipalities, out of a total of 565, in New Jersey who share this rating. Less than 5 percent of New Jersey’s municipalities have earned an AAA rating and I am extremely proud of Upper Freehold Township for this achievement.
“Being awarded an AAA rating by S&P will result in significant cost savings on interest payments due on the bond refinancing we are currently structuring, as well as future borrowing we have planned in order to continue our township-wide road improvement plans,” she added. “As a municipality’s bond rating increases, the rate of interest we pay for borrowing money in the bond market decreases. I fully expect the savings will exceed $100,000 over the course of the current refinancing and our future immediate expected borrowing needs.
“This accomplishment is due to many years of diligent efforts by numerous people to maintain a stable financial environment. The decisions and actions of our governing body, as assisted by their outstanding team of advisors …. and all of our other township professionals, have created a well-managed township with a stable financial forecast,” Kelly said.
In a letter to Kelly informing the CFO of the municipality’s rating upgrade, Sherry Tracey, senior managing director, Phoenix Advisors, Bordentown, called the AAA designation a “perfect credit rating” and said it “will provide a tremendous benefit to the township on the upcoming refunding bond sale and future debt issuance as well.”
“You should be very proud of the job you have done at the township, keeping the finances in such strong shape, working with the Township Committee to keep spending manageable and putting the policies and practices into place that have earned the township the highest possible management score as well. … S&P said one of the main factors that led to the two-notch upgrade is that they don’t see any downside risk right now or any reason the township would not be able to continue to maintain operations as you have the last several years,” Tracey wrote.
In their report announcing the AAA rating for Upper Freehold Township, two representatives of S&P wrote, “We view the township’s management as very strong, with good financial policies and practices under our Financial Management Assessment methodology, indicating financial practices exist in most areas, but that governance officials might not formalize or monitor all of them on a regular basis.
“In addition, our assessment of management indicates the township’s limited service levels, which we believe reduce operational risk. Highlights include budget preparation that includes the use of a combination of zero-based budgeting and historical trend analysis looking back five years for revenues and expenditures.”
Under a section marked Outlook, the S&P representatives wrote, “The stable outlook reflects the township’s very strong budgetary flexibility and liquidity position. The township’s very strong economy and management factor scores further lends stability to the rating. While the township’s combined fixed costs are high, in our opinion, the township has historically managed well. Furthermore, the township’s debt policy requires the maintenance of level debt service.
“As such, we do not believe fixed costs will further increase in the near term. Given the many very strong factor scores and the historical ability of the township to manage these high fixed costs, we do not expect to change the rating over our two-year outlook horizon. However, although unlikely in our opinion, if the township were to experience fiscal pressures and use reserves to bridge any imbalances without timely restoration, or fixed costs were to significantly rise, we might lower the rating,” the S&P representatives wrote.