Standard & Poor's Ratings Services said it raised to AA from AA-minus its long-term rating on Rahway, N.J.'s outstanding general obligation bonds.
At the same time, Standard & Poor's assigned its AA rating to the city's series 2013 GO bonds. The outlook is stable.
"The upgrade is based on our recently released local GO criteria," said Standard & Poor's credit analyst Linda Yip.
Standard & Poor's also assigned its SP-1-plus short-term rating to the city's 2013 bond anticipation notes (BANs).
The raised rating reflects the city's: very strong economy which benefits from New York City's broad and diverse metropolitan area; strong budgetary flexibility demonstrated by improved finances and keeping tax levy increases below the state's cap, providing additional taxing flexibility over the next two years; strong budgetary performance, including improved finances; very strong liquidity to cover both debt service and expenditures; adequate management conditions with, what we consider, standard financial policies and practices; adequate debt and contingent liabilities, driven mostly by the city's high net direct debt as a percent of revenue; and strong institutional framework.
The bonds and notes are general obligations of the city, secured by its full faith and credit pledge. We understand management will use bond proceeds to refund roughly $7.4 million in outstanding BANs, which were issued to fund various capital improvement projects. Management will use note proceeds to refund roughly $2.5 million in outstanding BANs and fund $1 million in additional projects.
Rahway, N.J., sits 15 miles away from New York City, in Union County.
The stable outlook reflects the city's very strong regional economy as well as our expectation that the city maintain strong reserves and liquidity during the next two years. Should any factors lower reserves to levels the rating agency considers weak, it could lower the rating.