Back in July Moody’s had a fairly optimistic view about our then $4.3 million in general obligation bonds, issuing a Aa3 rating (which wasn’t that great anyway. I wrote at the time that plenty of NJ towns had better ratings.) But our mayor was happy and told the Star “We are proud of this rating and will continue to work hard to keep taxes flat and our town financially sound.”
Six months and a hurricane later that $4.3 million has risen to $9.4 million and Moody’s has taken notice, putting this revision out on Dec 18:
Moody’s revises the outlook on the Borough of Belmar (NJ) to negative in the aftermath of Hurricane Sandy
Affirms Aa3 General Obligation rating on roughly $9.4 million of outstanding debt
New York, December 18, 2012 —
Moody’s Investors Service has revised the outlook on the Borough of Belmar (NJ) to negative in the aftermath of Hurricane Sandy. Moody’s affirms the Aa3 rating on roughly $9.4 million of outstanding general obligation debt, secured by the borough’s unlimited property tax pledge.
SUMMARY RATINGS RATIONALE
The Aa3 rating reflects stable, adequate reserves, conservative budgeting, a moderately sized tax base with solid wealth levels, and a manageable debt burden.
The negative outlook reflects the risks the borough faces in the aftermath of Hurricane Sandy, including potential reduction to assessed value, the increase in debt burden from an expected bond sale to pay for boardwalk reconstruction and other clean-up costs, and the susceptibility of the budget to sensitive tourism-related revenues.
STRENGTHS
— Solid wealth levels
— Stable financial profile
CHALLENGES
-Declining fund balance
-Some reliance on seasonal revenues
-Roll-over risk posed by short-term notes
Outlook
The negative outlook reflects the risks the borough faces over the next one to three years, including probably reductions to assessed value, the increase in debt burden from an approved bond ordinance, and the performance of seasonal, tourism-related revenues.
WHAT COULD MAKE THE RATING GO UP
– Sustained build-up in reserves
-Strengthening of tax base
WHAT COULD MAKE THE RATING GO DOWN
-Depletion of reserves
-Structural imbalance to budget
-Failed market access for short-term debt
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And they don’t even know yet about the additional $3.5 million being proposed Wednesday night.
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