Moody’s Investor Services has assigned Berkeley Heights Township an MIG 1 short-term rating and affirmed its Aa1 long-term credit rating which reflects the township's strong fundamental credit quality and its established record of market access. Moody’s positively viewed the new redevelopment projects coming online – which will bring in PILOT revenue – its conservative fiscal approach in the past few years, and long-term financial planning to pay down the debt, as well as increase revenue streams and reserves.
“The financial position of the township has improved since its new management team was established in fiscal 2019,” the Moody’s report states. “The growth in reserves seen in fiscal 2019 and 2020 are expected to continue in the near-term. The debt burden of the township is slightly above peers but the township made a large one-time pay down in fiscal 2021 with the sale of property. … The township's financial position will remain strong in the medium term as management continues to budget conservatively and new PILOT revenue come on line.”
That sale of property is in reference to the old Little Flower Church property, for which Toll Brothers recently paid the Township $10.5 million. Those funds were used in March 2021 to pay down the municipal complex construction debt in the form of outstanding bond anticipation notes. That transaction was part of the initial redevelopment agreement the Township made with Toll Brothers.
Current Fund balance increased to $2.5 million or 11.7% of revenue in 2019 from $1.8 million, or 9.6% of Current Fund revenue in 2018. Moody's makes certain adjustments to New Jersey local governments' fund balances to include receivables and reserves that would be eligible to be included in fund balance under GAAP accounting but are excluded as a result of state statutory accounting regulations. The township's Moody's-adjusted Current Fund Balance increased to $4.8 million (22.6%) from $3.6 million (18.8%) in 2018. Fiscal 2019 results mark a six-year high for the township.
Fiscal 2020 results show another strong year for the township, Moody’s points out:
- Adjusted fund balance is set to increase to $6.2 million or 26.4% of revenue.
- Overall, the township's conservative budget led to strong revenue collections.
- Receipt of delinquent taxes and other miscellaneous revenue generated $764,000 in excess of budget.
- Current tax collections remained strong through the pandemic (Thank you, residents!).
“The fiscal 2021 operations are expected to continue to hold strong as the management team is continuing to be conservative in revenue,” the report states The additional forthcoming PILOT revenue “will help the township continue to improve its reserve position. Future credit reviews will take into account its ability to continue to increase reserves as it has done in fiscal 2019 and 2020.”
The Township's debt burden will remain slightly elevated for the rating category at approximately 1.8% of full value. Berkeley Heights MIG 1 rating – which reflects the township's strong fundamental credit quality - will be applied to its $29 million Bond Anticipation Notes consisting of $24.1 million Bond Anticipation Notes, Series 2021A and $4.9 million Bond Anticipation Notes, Series 2021 B which are coming to market on June 24th.
“This year’s Moody’s rating is a testament to the hard work on financial planning and the conservative approach we have taken to our Township’s budget from Day 1,” said Mayor Angie Devanney.
“We are constantly seeking additional revenue streams – such as sewer connection fees – and grants to offset capital improvement projects, in addition to working toward obtaining zero-to low-interest financing for capital projects from the New Jersey Infrastructure Bank. Finding and obtaining alternative funding for what Berkeley Heights needs is not always easy, but it is our responsibility to our residents – our hard-working taxpayers - to try to offset our local financial burden as much as possible, while still keeping the level of services offered high.”
Read the entire official Moody's report here.