Standard and Poor’s has issued a ‘AA’ rating and stable outlook for Galloway Township, New Jersey’s series 2011A general obligation (GO) bonds and series 2011B GO refunding bonds, despite the fact that Galloway’s unemployment is higher than the state and national average.
Standard and Poor’s does not expect the rating to change any time within the next two years.
According to the report issued by Standard and Poor’s, the rating reflects the organization’s view of the township’s:
- stable local economy with additional access to the broader Atlantic City employment base;
- diverse property tax base with what the organization considers to be strong wealth and income;
- strong finances despite softening in economically sensitive revenue; and
- low debt, along with limited additional capital needs.
“If you look at the debt, it’s extremely low, and our fiscal process is sound,” Mayor Keith Hartman said. “It speaks volumes for the fiscal policies we have in place. It shows we are doing the right thing, and S&P, who has no stake in this, says we’re doing the right thing as far as our fiscal policies are concerned”
“It’s definitely positive,” said Councilman Jim Gorman, the lone Democrat on the council. “We’ve worked hard on it. The recession hit us first, and we’re one of the first to come out of it.”
Hartman said the township’s S&P rating has improved over each of the last four years.
However, the report also listed unemployment in the township at 11.8 percent as of May of this year, and 10.8 percent for 2010. State unemployment is at 9.5 percent and national unemployment is at 9.6 percent.
“There’s very little we can do as a council to change the unemployment rate,” Hartman said. “We can try to attract ratables, but job creation lies on the state level. We can do what we can to make this a place you want to live, shop and support business, but there’s not a lot we can do to create jobs.”
Hartman pointed to the casino and construction industries as points of concern, as did Gorman.
“It’s unfortunate, but that’s why we need to bring ratables into the area,” Gorman said. “The casinos have had a lot of layoffs. Pennsylvania is taking a huge chunk of that.”
Gorman said he expects the new Revel casino and the coming Hard Rock Café to help boost the industry.
Standard and Poor’s still considers income in the township to be strong, with median household effective buying income at 125 percent of national levels.
According to the report, Galloway’s full-faith and credit GO pledge secures the bonds. It says township officials plan to use the 2011A bond proceeds to redeem bond anticipation notes that will mature on Sept. 7 of this year, and provide new financing for various projects.
The report said the township plans to use the 2011B bond proceeds to refund a portion of the township’s 2002 GO bonds for debt service savings.
Galloway’s financial status is considered strong, in part, because the township “raised the budget by just over 1.4 percent over 2010,” and it is complying with the new 2 percent tax cap.
According to the report, the township ended 2010 with a “slight $441,000 current general fund balance drawdown due to revenue coming in below budget.” The township also deferred $800,000 of its school tax payment for the year, and closed the year with a $2.8 million unreserved current fund balance, which comes to 12.7 percent of expenditures.
Property taxes account for 68 percent of the township’s revenue. Other local fees account for eight percent, and current collections are 99 percent.
According to the report, the township’s overall net debt is two percent of market value at $1,818 per capita, and the township plans to retire 97 percent of its debt over the next decade, and have it completely wiped out in 15 years, and the township has said it will not issue any long term debt in the near future.
The report characterizes Galloway’s budgeting as “conservative,” but says it has no formal debt policy.
“I’ve never believed in a debt policy,” Hartman said. “We have to be able to react and respond to debt. We have to be able to chip away at the debt, and not have a policy in place that might be restrictive.”
Locally, a ‘AA/stable’ rating was also issued for Atlantic County, and an ‘A/Negative’ rating was issued for Atlantic City. While many Galloway residents are employed in Atlantic City, the presence of the Federal Aviation Center, the Richard Stockton College of New Jersey and AtlantiCare Regional Medical Center helped with the township’s rating.
The Federal Aviation Center employs 3,000, AtlantCare Regional Medical Center employs 3,500, and Stockton employs 840 Galloway residents.
The report also emphasizes township access to countywide employment opportunties and the Atlantic City job market as a strength, as well as the expansion plans for Stockton and the medical center. It hailed Stockton’s purchase of the Seaview toward the end of last year and its $300,000 annual donation to the township in lieu of paying taxes as a positive, although the township expects assessed value to decline by about $12 million during the 2011 fiscal year.
“When you add up all the ratables, Stockton is no longer there, but their revenue is still there,” Hartman said.
The report also states that Galloway’s revaluation in 2009 increased assessed value for township homes by 91.5 percent, to $3.68 billion, and it then increased to $3.69 billion in 2010.
The report characterized the decline of market value by 4.7 percent to $3.61 billion “modest,” as it remains at $91,382 per capita, which the organization considers to be very strong.
The report also highlight’s the township’s interlocal agreements neighboring police departments.
There are still about 10 commercial property tax appeals remaining for the reval, and the township reports the reserve for uncollected taxes will cover the township’s potential exposure for property tax refunds.
According to the report, the 10 leading taxpayers account for just 5.1 percent of assessed value.