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June 4, 2014

RE: League Mini Conference to Address State and Municipal Credit Rating Issues

Dear Mayor:

On February 25, when Governor Christie presented his proposed budget to the Legislature, he identified bond payments as one of the three “entitlements” (along with pension payments and public employee and retiree health benefit costs) that would consume ninety-six percent (96%) of the State’s then-projected revenue growth. Since then, press accounts have described the negative reaction of the bond rating agencies to developments in Trenton.

For over a century, tax exempt municipal bonds have been the main source of funding for local and State government public improvement projects. It allows public entities to secure the capital they need to make immediate improvements, and to repay investors over some part of the useful life of the project. Roads and bridges, water and sewer systems, schools, hospitals, public housing and transit systems have all been built, maintained and repaired because local governments and independent authorities have been able to market low risk, low interest, tax exempt municipal bonds.

We all know how much bond ratings matter.  The lower the bond rating, the higher the interest rate the issuer has to pay. A higher rating, however, will lower the impact on property taxpayers.

We want to remind you of the threats to the federal income tax exemption that could cause increased interest rates. We last wrote about them in our August 7, 2013 letter (http://www.njslom.org/letters/2013-0807-municipal-bonds.html). The threats are not a front burner issue in Washington, at this time. They could easily reemerge, however, as part of a tax reform or a deficit reduction effort. Accordingly, we urge you to discuss this matter with your Congressman and with our U.S. Senators.

We also want to alert you and your municipality’s finance professionals to a session we have scheduled at our June 13 “Mini Conference” in West Windsor. Entitled “The Actions Local Governments Can Take To Strengthen Their Bond Rating,” this session features nationally recognized experts, including Moody’s New Jersey analyst Vito Galluccio, Jennifer Edwards of Acacia Financial Management, Leon Costello from Ford-Scott & Associates, Dave Thompson and Sherry Tracey from Phoenix Advisors and League Associate Counsel Ed McManimon, Esq., of McManimon, Scotland & Baumann.

This panel will discuss credit ratings issues, particularly the effects that the latest State rating downgrades and State pension funding policies will have on local governments. It will provide you and your finance professionals with the most current information available anywhere on this crucial topic. Continuing education credits will be available for professional certifications.

To register for the Mini Conference and for more information on this, and other educational sessions, visit the League’s website at www.njslom.com

Very truly yours,


William G. Dressel, Jr.
Executive Director

 

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