Township gets mixed ratings from credit agencies

August 16, 2019

Bloomfield Township election results on Tuesday, August 6, may have had mixed impact on the township's credit rating, as recently noted by Moody's Investor Services and Standard and Poor's Rating Services.

Moody's in December 2018 gave the township a AAA negative rating based on $164 million in unfunded liabilities in Other Post Employment Benefits (OPEB) being carried by the township. The AAA rating is near the top of the rating system, but it carried a negative outlook, based on unfunded liabilities. The agency on August 8 downgraded the township's rating to AA. Credit ratings corresponds to the rate the township can borrow.

Bloomfield Township Supervisor Leo Savoie said Moody's told the township it lowered the rating because of the amount of unfunded liabilities it was carrying, saying "no municipality with that much liability should have a AAA rating."

Moody's in December 2018 noted it maintained the AAA rating because of its willingness to tap into its base, with voter approval, to raise revenue and maintain its healthy financial balances. The agency adjusted the rating following failure of a proposed tax to address township liabilities.

Meanwhile, S&P upgraded the township's credit rating from AAA negative to AAA/Stable.

In upgrading the township's credit rating, S&P noted a very strong economy; strong management with good financial polices and practices under S&P's financial management assessment methodology; adequate budgetary performance; very strong budgetary flexibility; very strong liquidity; a weak debt and contingent liability position; and a strong institutional framework.

While S&P noted the township carries a large OPEB obligation, it noted its low overall net debt of less than three percent of market value and rapid amortization, with 72.8 percent of debt schedule to be retired in 10 years.

"Because the SAD did not pass, management will implement its plan to further reduce expenditures to maintain structural balance in its public safety fund," S&P said in its assessment. "Given that it is midway through fiscal 2020, the township expects it may have up to a $1 million decrease in fund balance across its general and public safety funds, but then will return to balanced operations in fiscal 2021. The township has a strong history of adjusting it's budget when necessary, and as a result, we expect Bloomfield to maintain its reserves and cash on hand levels we consider very strong."

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