Mayor: No Immediate Impact from Moody's Downgrade of Borough Bonds

The decision by Moody's Investment Service to lower the rating on New Milford's bonds will have no immediate impact on the town's finances or its ability to issue bonds, Mayor Ann Subrizi reported to the Mayor and Council at Monday night's work session meeting.

On Nov. 10, Moody's lowered the rate on New Milford's 2005 bonds from A1 to Aa3. In Moody's terms, an Aa3 rating means that an obligor has a very strong ability to meet its financial commitments while a rating of A1 represents that an obligor has a strong capacity to meet its financial obligations, but is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligors in higher-rated categories. 

Moody's is currently reviewing every municipality's outstanding credit "due to the impact of the economic slowdown, as well as budget and tax constraints implemented by [state government in] Trenton," the mayor said.

Subrizi said that Moody's downgrade does not affect Standard & Poor's AA rating of the borough's 2009 bonds.

"The $1.685 million outstanding 2005 bonds were issued at a coupon rate of 3.5% and these bonds will finally mature in 4 years," Subrizi commented. "The change does not affect the interest that the borough pays on these bonds since the coupon rate is fixed." 

Subrizi added that Moody's adjustment may have an impact on future interest rates the borough pays on bonds and notes; however, Standard & Poor's AA rating is equivalent to the prior Moody's rating of Aa3 and the town has the option to have future debt issued by Standard & Poor's as it did in 2009.

Subrizi also explained that New Milford is not alone in having its credit rating adjusted as a result of financial issues beyond its control. Since 2010 other Bergen County municipalities including Carlstadt, East Rutherford, HoHoKus and Wood Ridge have had their rating lowered by Moody's. 

Although Moody's recognized New Milford's many strengths, including a low debt burden, above-average wealth levels and low unemployment, it also recognized that, like many towns in Bergen County, the borough has some exposure to tax appeals from its tax payers due to the decline of property values. Also, the borough has needed to utilize a fund balance in order to maintain the borough and keep within the 2% cap on property tax increases.

Additionally, Subrizi said, due to delays outside of the borough's control, tax bills through the state were delayed causing the borough to have a tax anticipation note in July. She stressed that no 2011 data had been incorporated in the report since that data is not yet complete. The data that contributed to Moody's report is from 2010 and prior.

In other business, the Mayor and Council discussed renewal costs associated with the Bergen County Joint Municipal Insurance Fund (JIF), and proactive measures to reduce risk such as training and safety programs for all employees.

Overnight parking was also discussed. It was resolved that the mayor and council will ask the police department for a two-week overview of people who call in to park their car overnight and review their report before further discussion. 

The council also unanimously voted in favor of a resolution opposing United Water's rate increase.  

A resident who is seeking to have the ordinance amended prohibiting the was referred to the Board of Health by Mayor Subrizi. The ordinance is enforced by the Health Department, the mayor noted.

The next Mayor and Council meeting is scheduled for Monday, Nov. 28, in the council chambers at . Representatives from United Water are scheduled to be present at this meeting.