21 Mar ESSEX COUNTY EXECUTIVE DIVINCENZO ANNOUNCES IMPROVEMENT IN LONG-TERM BOND RATING Moody’s Investors Services Upgrades Essex County Bond Rating to Aa2 with a Positive Financial Outlook
Newark, NJ – Essex County Executive Joseph N. DiVincenzo, Jr. announced that Essex County’s bond rating has been improved to Aa2 with a Positive Financial Outlook by Moody’s Investors Services. This represents an upgrade over the previous rating of Aa2 with a stable outlook, which was issued in 2007. This is the seventh time that the County’s long-term bond rating has been upgraded since DiVincenzo took office in 2003.
“Improving the financial strength and stability of Essex County is the most important initiative that we have undertaken, because without fiscal health it’s impossible to make an impact anywhere else,” DiVincenzo said. “Our conservative fiscal approach has always been about introducing balanced and responsible budgets, avoiding one-shot revenues and finding recurring revenue sources, and building our fund balance. These steps have helped us avoid budget deficits despite rising health benefit and pension costs, and save money on interest costs,” he added.
Moody’s assigned the upgraded bond rating to the issuance of $43.55 million of General Obligation bonds to refinance existing debt issued for capital improvement projects for the County from 2010, Vocational Technical School District from 2007 and Essex County College from 2008. According to Moody’s report, dated March 11, 2016, “The County’s financial management practices are strong given conservative budgeting of revenues and expenditures. The county incrementally raises the property tax levy every year and controls discretionary spending in order to meet rising fixed costs.”
Moody’s issued a second financial report on Essex County, also on March 11th, for $25 million of Bond Anticipation Notes that will be used to partially pay for the construction of the new Essex County Congressman Donald M. Payne, Sr. Vocational Technical School Campus. This report reiterates Moody’s confidence in Essex County’s financial standing, stating that “the positive outlook reflects our expectation that the county’s financial position will remain stable at improved levels” and that “the county’s financial position is expected to remain stable at improved levels going forward, given its adequate balance sheet position.” It also attributed Essex County’s financial health to its fund balance, which Moody’s estimated will reach about $76 million in 2016. The fund balance has improved Essex County’s cash flow and allowed the county to avoid using Tax Anticipation Notes (TANS) since 2013.
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 $64.4 million in the 2016 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.