July 18, 2018 | ° F

Investor service gives city lower credit rating

Moody's Investor Service gave the city of New Brunswick an A2 rating this year, which the company says reflects lower financial stability in the city.

Moody's works to provide credit ratings, research and financial risk analysis for countries and municipalities. It cited weakened fiscal flexibility and the city's guarantee of $183 million in parking revenue bonds, according to a Dow Jones newswire article. The city received an A1 rating last year — one notch higher than its most recent one.

"Although the New Brunswick Parking Authority has a long track record of healthy financial operations with no support from the city, we believe the current project's reliance on commercial lease revenues could strain the authority's financial health should these revenue sources erode," Moody's told Dow Jones.

The city's backing of the parking authority's debt puts it at a greater risk of default, making it responsible for coming up with the necessary funds should the agency face financial trouble, according to Moody's logic.

New Brunswick city spokesman Bill Bray said the statewide cap on local property taxes, which limits the city's ability to raise revenue, is a major reason for the A2 rating.

"One of the biggest things impacting the ratings — both here and in other communities — is the new 2 percent cap on property taxes," Bray said. "If a cap has been imposed upon our ability to increase taxes, that has an impact — according to Moody's — on our bottom line."

The credit ratings agency lowered its ratings on a total of 12 New Jersey cities since August, likely because of the economy and the consequent cuts to many municipalities.

Regardless of Moody's analysis of the city, New Brunswick has managed to maintain a high level of municipal services for its residents, Bray said.

He also cited self-sustaining projects, such as the Gateway Project and the forthcoming New Brunswick Wellness Plaza, as examples of city endeavors that will bring economic success for the city in the future.

"These investments, at a time when cost of capital and construction are at an all-time low, will position the city to take advantage of growth opportunities as the national and regional economies rebound," Bray said.

Although the economic outlook seems negative, the financial decisions the city makes now will lay the foundation for a better future for the city's residents and the 100,000 daily visitors, he said.

Unlike Moody's, Standard and Poor's, another financial agency that rates the outstanding debt of various companies and municipalities, once again gave New Brunswick an AA-credit rating. The S&P rating is considered higher than that of Moody's.

Colleen Roache

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