Collingswood, N.J., which objected two years ago when Moody’s Investors Service slammed it with a six-notch downgrade to junk, received a AA-minus rating from Standard & Poor’s, the fourth-highest rating available.
Friday’s rating, Standard & Poor’s first for the 14,000 community in Camden County seven miles southeast of Philadelphia, affects general obligation bonds the borough issued in 1998, 2008 and 2009. The outlook is stable.
According to S&P analyst Hilary Sutton, Collingswood’s budgetary performance, flexibility and liquidity are adequate, with 2012 audited current fund reserves at 5.9% of current fund expenditures. Available cash amounts to 16.3% of adjusted current fund expenditures and 86.2% of debt service.
“We believe the borough has strong access to external liquidity as it has issued GO bonds frequently during the past 15 years,” he wrote.
Sutton added: “We consider Collingswood’s economy to be adequate with access to the broad and diverse economy of Philadelphia-Camden-Wilmington [metropolitan statistical area].”
In September 2011, Moody’s dropped Collingswood to speculative-grade Ba1 from A1, based on its belief that the borough would struggle to pay debt it guaranteed to help finance condominium development.
The move drew a sharp rebuke from Mayor James Maley that included a YouTube video. Later, Maley compared the junk rating to a gigantic nose pimple, saying “it doesn’t really affect how you operate, but it makes you look really bad.”
A message seeking comment was left with Maley on Monday.
Moody’s upgraded Collingswood one notch to Baa3, the lowest rung of investment grade, in June 2012. There the rating remains, creating a six-notch difference between S&P and Moody’s.
The borough had guaranteed $4.5 million of an $8.5 million loan LumberYard Redevelopment LLC had taken out in 2006 to finance the building of the condos. After the economy imploded two years later, many of the condos were unsold.
Collingswood satisfied a settlement agreement regarding the LumberYard project in February 2012.
Collingswood last year issued $5.1 million of GO bond anticipation notes that were privately placed with Susquehanna Bank. According to S&P, the notes were rolled in 2013 through a competitive sale.
S&P called the borough’s debt and contingent liability “very weak.” According to S&P, debt service measures 19% of fund expenditures and overall net debt is 22% of fund revenue.
The borough has self-supporting water and sewer bonds and is scheduled to pay down 74% of principal within 10 years, including the bans. “Management reports the borough is considering issuing bonds for the police station,” S&P said.
