Berkeley To Save Money When Borrowing

Berkeley Town Hall (Photo by Micromedia Publications)

BERKELEY – The township’s bond rating improved, which means it stands to save money when borrowing for projects, officials said.

All municipalities have bond ratings set by independent companies. Berkeley uses a company called Standard and Poor’s. This company improved Berkeley’s rating from an A+ to an AA-, which is one step up the ladder.

“Think of it as having a very good credit score, in the 700s, or close to 800,” said Fred Ebenau, the township’s chief financial officer. He said the score puts the town on par with Fortune 500 companies.

What this translates into is having a lower interest rate when money is borrowed, he explained.   Not only can the town borrow at a lower rate, but if an opportunity arises that a lower rate is available on money it already owes, it can pursue the lower rate.

“Wall Street bond markets would want to lend money to us because they know we’ll pay them back,” he said.

The bond rating looks at a number of factors, including the tax rate, how much surplus is in the town’s coffers, and the total value of all real estate in town, he said.

It had been a few years since Standard & Poor’s (S&P) had rated the township, he said. That last time, the township improved two steps from A- to A+.

He expects that S&P will revisit this rating again soon. He said the next time, the township will likely get at least the next step up, which would be AA.

The state pension system is affecting the town’s rating. The state does not bill the township the full amount that the town owes. S&P docks municipalities that don’t pay the full amount. Ebenau said he doesn’t know of any municipality that pays more than what the state asks.

Mayor Carmen Amato said in a press release that this move rewards the township’s “strong budgetary performance, flexibility and very strong liquidity.”

The increases in the bond rating is impressive given how the township had lost so many ratables to Superstorm Sandy, he said.

“Once again we are extremely pleased that S&P has recognized the extreme effort we have made to be financially responsive to our taxpayers despite these difficult economic times,” Amato said.

He thanked the administration and Councilman John Bacchione, who chairs the finance committee, for their efforts.