Moody's Upgrades Lawrence Township Credit Rating to Aa1 from Aa2.

The community of Lawrence Township has been the beneficiary of years and years of strong and responsible fiscal management.  This is not me taking any credit for this fact at all.  I am simply following an established playbook and executing it under the watchful eyes and guidance from our elected officials.  Our past longtime municipal managers (Bill Guhl and Richard Krawczun) and our current CFO Peter Kiriakatis have positioned the finances of this community very well.  This, in turn, directly effects our ability as a community to undertake significant capital projects under the best of terms from institutional lenders as a borrower.  To speak plainly, we as a community have saved hundreds of thousands of dollars in interest payments over the years because of our strong finances.

On November 18, 2019, Moody's (an American credit ratings agency lender's rely upon when issuing bonds to municipalities) issued a press release upgrading the Township's rating to Aa1 from Aa2.  This rating means we are an "excellent" security at the highest level of this rating category.   If you want to explore what this means further, go to https://www.moodys.com/.

What follows are some of the more interesting comments from Moody's press release:

Credit strengths:  

- Large tax base with strong resident wealth and income.

- Strong finances.

- Low debt burden.

Financial Operations and Reserves: Growing and healthy financial position

The township's financial position has been on a positive trend over the past four years and will remain strong in the near to medium term. In 2018, the township’s Current Fund balance amounted to $15.6 million or 32.5% of revenues. Moody’s makes certain adjustments to New Jersey local governments’ fund balance 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 Moody’s adjusted Current Fund Balance amounts to $24.2 million or a healthy 50.5% of operating revenues. Both figures are materially up; over the past five years, reported fund balance has increased 207.7% while adjusted fund balance is up 125%. Management attributes the strong results to a number of factors including controlling expenditures mainly by reducing staffing levels through attrition, as well as regular increases in the property tax levy. The strong financial performance is particularly notable as the township is actively engaged in efforts to replace debt with pay-as-you-go capital spending. Favorably, the bulk of the township's revenue (61.5%) is derived from property taxes. State aid contributes only 8.3% of revenues. An additional 11.8% comes from sewer charges and the remainder comes from various miscellaneous sources including construction code fees, ambulance fees, etc. Fixed costs are moderate at just under $8 million or 16.7%. Although 2019 is not yet over, management reports that revenues and expenditures are generally tracking well to budget. The township expects to at least replenish the fund balance appropriated in the budget and may even run a modest surplus.

LIQUIDITY

The township's cash levels ended fiscal 2018 at $24.8 million or a healthy 51.8% of operating revenues.

Management and Governance

Management is proactive in the township's financial management by producing monthly budget reports to track revenue collection and programmatic spending throughout the year. New Jersey cities have an institutional framework score of “Aa,” or strong. Revenues are moderately predictable and mostly consist of property taxes; however, cities are required to make county and school district tax levies whole in the event of tax appeals. Revenue raising ability is moderate as cities are constrained by a 2% cap on the property tax levy. Cities can raise the levy above the cap for debt service, pensions and certain qualified expenses. Expenditures, which primarily consist of personnel and public safety, are highly predictable. Cities have a moderate ability to adjust costs given the presence of collective bargaining and high fixed costs.

As we cycle past the election season, it is my hope that the residents of Lawrence Township have confidence that those of us charged with the responsibility to operate the government that serves you are doing what you require, expect and deserve.