14 Aug ESSEX COUNTY EXECUTIVE DIVINCENZO ANNOUNCES IMPROVEMENT IN LONG-TERM BOND RATING Moody’s Investors Services Upgrades Essex County Bond Rating to Aa1 with a Stable Financial Outlook
Newark, NJ – Essex County Executive Joseph N. DiVincenzo, Jr. announced that Moody’s Investors Services has improved Essex County’s bond rating to Aa1 with a Stable Financial Outlook. This represents an upgrade over the previous rating of Aa2 with a Positive Financial Outlook that was assigned in March 2016. Under DiVincenzo’s leadership, Essex County’s bond rating has been upgraded eight times, rising from junk bond status in 2003 when he entered office to being just one step away from the highest rating. (Another Wall Street agency, Fitch Ratings, has upgraded the County’s bond rating six times since 2003 to its current rating of AA-plus, which was a two-step jump in August 2016.)
“I always look at the bond ratings we receive from Wall Street as our report card because they come from independent professionals reviewing our finances. Over the last 15 years, we have aggressively monitored our revenues and expenditures; continually asked our directors, Constitutional Officers and agencies to reduce spending; initiated long-term planning to control our debt; and followed conservative budgeting practices to regain our financial strength,” DiVincenzo said. “Restoring our financial health has been the key ingredient to our transformation in Essex and has helped us weather the storm of the Great Recession, handle rising health care and pension costs, and avoid budget shortfalls,” he added.
In its seven-page report issued on Friday, August 11th, Moody’s stated the ratings upgrade was due to the strong management of the county, its conservative budget practices and its efforts to maintain a fund balance. “Essex County has a history of strong management and conservative budgeting,” it states. “The county’s financial position should strengthen further in the medium term as management continues to budget conservatively,” it adds. It noted that continuing to maintaining “positive financial operations leading to increases in current fund reserves” could lead to another upgrade in the future.
Moody’s assigned the Aa1 rating to $92.4 million of general obligation bonds to finance the construction of the Essex County Donald Payne School, various capital improvement projects at Essex County College and throughout the County, and refinance existing debt from the Essex County Improvement Authority at lower interest rates. The refinancing is expected to save $5.3 million.
The upgraded bond rating will help save Essex County millions of dollars in interest and insurance costs when it sells bonds, and will help make its bonds more attractive to private investors.
When DiVincenzo took office, Essex County had a $64 million budget deficit and nothing in its fund balance. After his first four years in office, DiVincenzo built the fund balance to $35 million in 2007. When the recession hit, the money from the fund balance enabled DiVincenzo to avoid layoffs and reductions in services and programs without substantially raising taxes. The fund balance reached a low of $9.8 million in 2009, but has been rebuilt to an anticipated $76.8 million in the 2017 Essex County budget.
Another fiscal initiative that has helped restore the confidence of Wall Street in Essex County is a comprehensive debt restructuring that occurred in 2007. Essex took advantage of low interest rates to refinance its existing debt without extending the deadline to pay off the debt. In addition, it set a policy to not exceed a total of $20 million in annual capital spending.
Before DiVincenzo took office, Moody’s had downgraded Essex County’s bond rating to Baa2 with a Stable Financial Outlook in November 2002 and threatened to downgrade the bond rating again. By 2005, the County’s bond rating had climbed to an A rating with a Positive Financial Outlook, which was its highest rating since 1994.