MORRIS COUNTY — Moody’s Investors Service and Standard & Poor’s (S&P) Global Ratings have both given their top AAA rating to Morris County’s financial stability in reviewing the county’s general obligation bonds and the county guaranteed bonds offered through the Morris County Improvement Authority, with S&P ranking the county’s credit characteristics above the United States.
The rankings, issued separately last week in reports released by the rating agencies, continue a AAA ranking Morris County has maintained for decades. The underlying consensus of the rating agencies is that Morris County has strong credit, a stable financial outlook and that the county continues to be forward-thinking, planning strategically in the face of major risks such as the COVID-19 pandemic and the potential for cyber-attacks.
“In retaining the county’s AAA rating with S&P and again with Moody’s, both rating agencies recognized the county’s quick and prudent response to the COVID-19 pandemic. We are proud of our efforts that saved lives and livelihoods, as we led the state in safely keeping businesses opened and our residents employed,” said John Krickus of the Morris County Board of County Commissioners, who also is the board liaison to the county finance department.
Savings for Taxpayers: The AAA rating benefits everyone in Morris County.
The AAA rankings allow Morris County and the municipal agencies within the county to take advantage of the best possible interest and financing rates when borrowing or bonding for major projects, therefore saving taxpayers hundreds of thousands of dollars annually. It is akin to having an exceptional personal credit rating because it reflects the ability of the county to meet its financial commitments. Obligations that are rated AAA are determined to be the highest quality, with the lowest credit risk.
“Morris County’s GO (general obligation) bonds are eligible to be rated above the sovereign because we believe the county can maintain better credit characteristics than the U.S. in a stress scenario,” S&P concluded in its assessment report.
Pandemic Planning and Response a Major Factor
Both S&P and Moody’s continued to emphasize that their ratings reflect Morris County’s detailed, planned response to the COVID-19 pandemic and continued diligence in addressing all potential impacts of the virus through the formation of a COVID-19 Strategic Planning Advisory Committee.
“The AAA rating reflects the county’s substantial tax base, strong and diverse economy, very high resident wealth and income, healthy reserve levels, and modest debt burden. The rating also reflects a long trend of strong, proactive financial management,” Moody wrote. “Although the pandemic has had a negative impact throughout the state, Morris County’s credit quality has not been impacted. The county created a COVID-19 Strategic Planning Advisory Committee, which meets regularly and has implemented a variety of measures to reduce the impact. The county’s largest revenue, property taxes, is guaranteed by its constituent municipalities.”
S&P underscored a similar assessment.
“We view the county’s management as very strong, with strong financial policies and practices under our FMA (Financial Management Assessment) methodology, indicating financial practices are strong, well embedded, and likely sustainable,” S&P concluded. “County officials quickly reacted to the pandemic and set up the COVID-19 Strategic Planning Advisory Committee, composed of county commissioners and management. The committee aimed to undertake an all-encompassing review and analysis of Morris County’s services, method of delivery of those services, and financial conditions over the next six years (2020-2025). We also viewS&P Global.jpg positively that the county has taken active measures to protect itself from emerging risks, such as cyber risks.”
The Morris County Board of County Commissioners noted the county’s prudent financial planning also enabled them to adopt another budget this year that maintains a robust capital spending plan while preserving services and programs that receive popular support from the public.
“We’ve maintained our AAA rating because Morris County is very prudent in how we fiscally manage our operations. Yet, while holding the line on county taxes, we are again moving forward this year with critical infrastructure projects at the same time we are directing spending toward key educational, human services, public safety, cultural and economic initiatives that serve all 39 Morris County municipalities,” said Commissioner Deputy Director Deborah Smith, who also is Chair of the Board’s Budget Committee.
The reports from the two rating houses were released in regards to the county’s General Obligation Bonds totaling $45.2 million, consisting of $37 million in General Improvement Bonds, $1.2 million in Park Bonds and $6.9 million County College Bonds and county guaranteed bonds issued by the Morris County Improvement Authority, consisting of $13.9 million in Guaranteed Renewable Energy Program Lease Revenue Refunding Bonds.
Since the Improvement Authority was established in 2002, the agency has provided towns, school districts, and the county itself with innovative and cost-effective methods of funding public projects while saving tax dollars. Through the authority, towns have been able to borrow under the umbrella of Morris County’s “AAA” bond rating to finance local projects, such as purchasing equipment and vehicles or constructing local facilities, at lower costs thereby reducing the property tax burden on their residents.
S&P’s report noted that Morris County has been able to face financial pressures stressing every county in New Jersey this past year.
“Over the longer term, rising pension, and other post-employment benefits (OPEB) costs may increasingly pressure the county’s budget. That said, we believe the county has sufficient budgetary flexibility to address these longer-term concerns, while management has also demonstrated an ability and willingness to reduce cost pressures, as evidenced by changes to retiree health benefits in 2007,” the report stated.
The S&P report went on to note its ratings reflect S&P’s assessment of the following factors, including S&P’s view of the county’s:
• Very strong economy, with access to a broad and diverse MSA;
• Very strong management, with strong financial policies and practices under our Financial Management Assessment (FMA) methodology;
• Strong budgetary performance, with a slight operating surplus in the current fund in fiscal 2020 according to unaudited results;
• Very strong budgetary flexibility, with an available fund balance in fiscal 2020 of 14.7% of operating expenditures according to unaudited results; while reserves grew in nominal terms, they declined as a share of expenditures due to a one-off increase in appropriations as a result of grant-funded pandemic-related expenditures;
• Very strong liquidity, with total government available cash at 35.5% of current fund expenditures and 3.2x governmental debt service, and access to external liquidity we consider strong;
• Adequate debt and contingent liability profile, with debt service carrying charges at 11.0% of expenditures and net direct debit that is 105.5% of current fund revenue, as well as low overall net debt at less than 3% of market value and rapid amortization, with 87.6% of debt scheduled to be retired in 10 years, but a large pension and OPEB obligation; and
• Strong institutional framework score.
