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S&P Lowers Town of Westfield's Credit Rating

The rating company made the downgrade based on "the town's deteriorated financial performance."

It was announced Monday that Standard & Poor's Ratings Services has lowered its long-term rating from 'AAA' to 'AA+' on the Town of Westfield's existing general obligation bonds.

The bonds, general obligations of the town, are secured by a pledge of the full faith and credit of the town for the payment of principal and interest thereon.

Simultaneously, S&P's has assigned its 'AA+' long-term rating to the town's GO . Proceeds from the series 2012 issue will be used to refund two prior bond issuances of the town. At the of the Westfield Town Council, the council approved a special ordinance that will provide for the refunding of outstanding bonds which will save the town and the swimming pool utility just over $182,000

In spite of this savings, the outlook is negative, according to the ratings service.

"The town of Westfield had several years of financial challenges that caused the fund balance to erode," said Standard & Poor's credit analyst Steve Tencer. 

The unreserved fund balance, which represents available and expendable resources, has declined 95 percent to $198,494 in fiscal 2011 from $3.89 million in fiscal 2007, according to S&P's data. 

"Finances for the town have been strained in our opinion," the attached report states. "The town has experienced a net operating loss each year since 2006."

Tencer referred to Westfield's new , which will generate $1.7 million in anticipated revenue, as "a step in the right direction," but noted that expenses have been exceeding revenue for the past several years.

The new rating will be placed on future bond issuances as well, Tencer confirmed. 

Other rating factors include S&P's opinion of the Westfield's:

  • Affluent, mature, residential community that has a lower-than-average unemployment rate stemming from access to the diverse labor markets in New Jersey and New York City;
  • Extremely strong wealth levels;
  • Large tax base with no concentration, although there has been some slight declines; 
  • low debt burden with limited future capital needs.

Town Administrator Jim Gildea and Councilman Sam Della Fera, finance committee chair, were unavailable for comment. 

Dem July 04, 2012 at 01:28 AM
Pete, our nations congress has very little to do with the irresponsible spending of those that got themselves in trouble with mortgages. Your comment goes from one end of the spectrum of town politics to the othe end being our nations congress. Stick to leading the parade and leave the politics alone.
South Westfielder July 04, 2012 at 02:38 AM
Mr. Blake, the downgrade is not good news for the leaders of this town or the town itself. That being said, only about 13% of our property tax dollars actually go to the town. The rest is for the schools and the County which hardly represents the needs of people in this town. At least the townspeople have the ability to change their leadership, but to change the county monopoly of the democrat machine must be taken down.
Jeff B July 04, 2012 at 02:45 AM
Dem, Pete is factually correct (not politics) about Congress' participation in this mess including many things he did not mention, such as encouraging wild lending - through Fannie and Freddie - to support home ownership for anyone who breathed; also in repealing Glass Steagall which enabled wild speculation in derivatives by financial institutions like AIG, which brought that one down at considerable tax payer expense; and in bailing out the big banks, which got in trouble with mortgages, which, to date, has given the USA what is known as the "Japanese Disease". Otherwise, as I previously noted, I think the town does the best of the three local bodies we pay for in taxes, which indeed is what this topic is about.
General Robert E. Lee July 04, 2012 at 03:15 AM
Hey Hogaboom has the Grand Marshall title you were given leading the Memorial Day parade gone to your shell shocked head? What is hindsite? Is it the same as hindsight?
NR9 July 04, 2012 at 03:36 AM
From above: “let’s…cut, and cut, and cut...." Many complain that “too much is being spent.” It’s typically a generic complaint like the one above. If a taxpayer is going to complain that taxes are too high, in my opinion, the taxpayer should back that complaint by pointing out SPECIFIC expense items in the municipal income statement where the taxpayer is absolutely sure there is a significant amount of fat that can be cut. Otherwise, I’d go with the belief that our politicians and town employees have already trimmed the fat and are working as lean as they can. For Westfield, NJ, a good starting point is at (www.westfieldnj.gov) with the document called “2012 Budget Introduction.” Scroll down to “sheet 12” which is the start of “General Appropriations” and focus on the 2nd to last column from the right which is ACTUAL amounts ‘paid or charged’ for the most recent calendar year that is available (2011). See numbers in the column titled: “Expended 2011 paid or charged.” Continue down to “sheet 29.” These sheets (sheet #12 to #19) contain detail of all $36,900,401 paid or charged during 2011. Direct link: http://www.westfieldnj.gov/vertical/sites/%7B57704CD8-22F3-44AB-BC43-B0B1CE80A3BB%7D/uploads/2012_Budget_Introduction.PDF I have no reason to believe there is any fat but if anyone who thinks their taxes are too high wants to take a shot at finding excess in there and suggest ideas for how we can “do more with less,” go for it.
A.John Blake July 04, 2012 at 10:01 AM
NR9,I don't disagree with you but when a citizen stands up at the Council meeting and asks a specific question about too many supervisors in a specific department and is met with silence by the Council,that is wrong.When a journalist calls the Administrator for an explanation about a negative rate change by someone like S&P, the Administrator should respond within one working day. For those who seek to defend all their actions behind the shield of $1 per year volunteerism , they should answer factual questions put to them politely by anyone, be they journalists or taxpayers. If they know, in advance, that they may have to explain why they did certain things, they might think twice about doing it. A.John Blake
NR9 July 04, 2012 at 11:21 AM
@A. John Blake. I agree with you completely. We are NOT in disagreement here. Your examples: A citizen stands up at the Council meeting and asks a specific question about too many supervisors in a specific department and is met with silence by the Council, that is wrong.- I AGREE 100% When a journalist calls the Administrator for an explanation about a negative rate change by someone like S&P, the Administrator should respond within one working day. - I AGREE 100% For those who seek to defend all their actions behind the shield of $1 per year volunteerism, they should answer factual questions put to them politely by anyone, be they journalists or taxpayers. - I AGREE 100% If they know, in advance, that they may have to explain why they did certain things, they might think twice about doing it. - I AGREE 100% My point, and I guess I might not have been clear enough, was suggesting taxpayers NOT simply say things like “Taxes are too high!” and “You politicians spend too much—cut, cut, cut” but instead, actually ask for detail for specific line items on the town income statement and then identify where, if at all, cutting is possible. Generic calls to “cut, cut, cut” are not very constructive. Identifying specific line items, (the “too many supervisors in a specific department” example above, is an excellent kind of a question) is very helpful to bring up to our politicians. I hope this clarifies my prior comment.
Westfield guy July 04, 2012 at 11:34 AM
2 cities in California just went bankrupt last week, having a AA+ rating is like having 5 numbers on Lotto at this point in the game. Its good Patch got this info in front of everyone, but with all the "USA Today" like readers out there, keep this all in perspective, its still very good.
NR9 July 04, 2012 at 11:42 AM
Following up on my reply to A. John Blake... I’ll provide an example. According to the 2012 budget, which shows 2011 actual amounts spent, Public Works spent $1,055,959 in “other expenses” representing about 3% of the town’s total $36,900,401 appropriated for the year 2011. I DO NOT think it would be fair to our politicians/town employees to simply declare that this $1,055,959 contains a lot of fat that can be trimmed. I DO think it would be reasonable for the town to share detail of what’s in there with the taxpayers and for taxpayers to see if there is any significant fat that can be identified for cutting out in future years. MESSAGE TO ELIZABETH ALTERMAN – Would it be possible for Patch to obtain, and publish in Patch, a more detailed version (as compared to the one at westfieldnj.gov) of those 2011 actual amounts? This would at least give taxpayers a chance to better see where tax dollars have been spent (i.e. transparency). I certainly don’t think every purchase of paper clips should be questioned and we certainly need to give our politicians and town employees plenty of breathing room to act in ways they deem appropriate (we did elect/hire them to do that!) and not stand there breathing over their shoulders. But, such detail could bridge the gap in providing transparency for taxpayers to better understand the dollar amounts that go into running a town.
NR9 July 04, 2012 at 11:54 AM
Westfield Guy is exactly right. Keep politicians and public employees accountable but no, the sky is not falling in going from AAA to AA+.
Jeff B July 04, 2012 at 12:52 PM
In fact, the Federal government recently was also downgraded from AAA to AA+. Westfield has a far better chance of actually repaying its debt and having zero debt on its balance sheet than the Feds - which will never be able to do that, can only repay old debt from new debt, and are increasing debt at an unsustainable rate.
Jeff B July 04, 2012 at 01:36 PM
NR9, I attended the Town Council meeting where Jim Gildea gave an excellent presentation of the municipal budget. As I have said, I think the town does a pretty good job. Your other issue about excess is easy to address conceptually, but very difficult to address in fact. I think that it ought to be clear that the range of government services provided and the cost of them will, in a democracy, eventually expand beyond the capacity to pay for them. How many more examples are needed beyond much of Europe, our Federal budget deficits, the State of California, and municipalities like Birmingham and Stockton? It always pays in the short run for any legislator or governing body to give out more services or compensation than can be afforded in the long run. You don't get re-elected by saying "we can't afford it". There is plenty of evidence that total compensation packages at all levels of government are well above what the private sector is paying for comparable education/skills. In Westfield, the starting teacher salary of $57,000, with fabulous fringe benefits, months of vacation, and job security is only the most egregious example. But Stockton, which had similar problems, illustrates how hard it is to deal with a compensation problem. Indeed, just last week, when Mitch Slater on the Board of Education's negotiating team voted against the raise deal for their Administrators, Ginny Leiz, another member of that team, publicly expressed her disappointment.
Rusty Cut July 04, 2012 at 01:46 PM
Tom, Jeff is spot on. Towns like Westfield are basically held hostage to towns like Elizabeth and Plainfield. County taxes are where 1/3 of your property taxes go and do you really think Elizabeth would ever stop voting in the Democrats? We are their lifeblood.
Rusty Cut July 04, 2012 at 01:52 PM
Jeff, the FED will never default on their debt. You see, they have the ability to create money out of thin air. Can't default that way. Finance 101. Your purchasing power will go down and bondholders will get paid back in principal that is worth less. But no, the feds will never actually default. Local towns and states do not have this luxury. They are much likelier to default.
Jeff B July 04, 2012 at 02:04 PM
Rusty Cut, I agree the Feds are less likely to default than a town, but my comment was different - that Westfield is much more likely to pay off its debt and have none. By the way, Greece effectively defaulted on its debt this year.
Rusty Cut July 04, 2012 at 04:07 PM
Yes, Greece defaulted because they do not have the ability to print more money. We do. We should be taking on more debt now while rates are low and the economy is poor. (Contrary to what typically happens)
A.John Blake July 04, 2012 at 04:09 PM
I do think it is fair to commend the Mayor and Council for the time and effort they expend on our behalf.It is not fair to presume that, because they are elected or because they are "volunteers", they have all the answers or the best answers.They must rely heavily on their appointees for the every-day running of the Town and it is to these people they should turn for answers both privately and publicly. There is no reason why the Mayor should know, off the top of his head, why we have two Sgts. and a Lt. In charge of three detectives in the police department. It might seem top-heavy but the Chief was sitting right there. He must know why he has things set up this way.He should tell us when the question is asked in a Council Meeting. The Fire Chief should tell us if we have enough men and why. He has been muzzled. Why can't the head of Public Works tell us about the "other expenses"? He should know. It is absurd to ask the "volunteers" for answers that can be provided by the professionals they hired. Let the Pros handle it. A.John Blake
Enough already July 04, 2012 at 04:56 PM
Too many people put way too much credence into these ratings agencies 'analyses'. All too many times the data analysis is shoddy, biased and is often wrong, which causes untold problems for all involved. Moody's and Fitch are no better and all are in competition for clients. Remember S&P's negligence in the CDO debacle and their Nov. 2011 erroneous downgrade of France?
Wally Westfield July 05, 2012 at 12:38 AM
perhaps, however the facts are that the town is spending more than it has been receiving for quite some time, burning through which were once plentiful reserves. Yet it continues to spend on "luxuries" rather than necesities in many areas.A lot of these "luxuries expenses" are "education system" related and many will still be absorbing cash after the intial users have left town and are no longer contributing. Especially with the # 19 ranking and fires that can't be controlled in a timely fashion. Wonder how those tax bills will help the selling prices ?
NR9 July 05, 2012 at 01:01 AM
@Jeff B. I think these are good points you've made. Well said.
Jeff B July 05, 2012 at 01:41 AM
Re: "Wonder how those tax bills will help the selling prices ?" Wally Westfield, excellent point! I was crying in the wilderness for years when times were good that the ever increasing spending and tax increases would one day catch up with us. When I bought my house in 1984, banks had true underwriting standards (and mortgage rates were 12+%). They looked for a down payment of 20% of the purchase price and a total monthly "nut" (including taxes and insurance) not more than 30% or so of your monthly income. We seem to be closer to this environment now and may be for many years. If so, then an increase in taxes must result in a lower amount a buyer can pay for one's house, all other things being equal, because taxes take up more of the amount the bank will allow you to be paying in total per month. (In recent years, declining mortgage interest rates have alleviated this issue to a large extent, but that can only go on for so long.) Bottom line, when your house is steadily going up in value, what's an extra $500-1,000 per year in taxes. But when it is going down or flat in value, rising taxes is a killer.
A.John Blake July 05, 2012 at 10:20 AM
The Real Estate interests tell us that Westfield has not been hit as hard as other towns.Whether a little or a lot, we're still down.The $1 million plus home owner isn't hurt that much. It is, as usual, the middle class homeowner who will be hit. Consider the poor people around the high school if they ever build those lighted turf fields.How big a hit will those properties take if they have to contend with the noise, traffic and parking problems they will have, not just during the day, but at night? How much will all those properties drop in value because of the desire of some to continue the spending on non-essentials and bundling them with the necessary ? A.John Blake
Sally McBride July 05, 2012 at 02:19 PM
So does it affect anyone's opinion, that in the current market, a town with a AA+ rating vs and AAA rating will pay about $1200/yr more on a $1,000,000 bond. Or how some people like to put it here around 3/100th of a penny a day per household?
Wally Westfield July 05, 2012 at 02:37 PM
Keep Spending Sally !
Pam July 05, 2012 at 04:45 PM
Most concerning to me is not the downgrade but the statement that "The unreserved fund balance, which represents available and expendable resources, has declined 95 percent to $198,494 in fiscal 2011 from $3.89 million in fiscal 2007". At this point I don't even care how it occurred but how we will correct this situation. I would love to have the mayor and designees give a presentation regarding this and possible solutions. How does this impact on the possible sales of my home? Other than voting we have no real control over the county, nj or us congress and their deal making which they then call legislation. As a town we need as they say fix our own house - what has Summit as asked before done differently to maintain there rating?
Sally McBride July 05, 2012 at 04:49 PM
where did I mention spending? Just saying that people are trying to make people think that this is a disaster and that the current council should be strung up for it. I guess I see where you made the mistake. You read what you want to read and assume that you are correct
Sally McBride July 05, 2012 at 04:51 PM
so $3.89M is the "correct" number to have? Why does it matter that a number dropped 95% when you do not know what they number stands for? Maybe that number was because of some one time income? I have no idea, but it seems like you think you do.
Westfield Taxpayers July 23, 2012 at 04:08 PM
The Town should cut spending, and pay down its debts. I think the headcount is far too high. So high, they can't seem to manage who is legally allowed into the state pension system. So we're paying higher state taxes as well! Lower the spending please!!!
Westfield Taxpayers July 24, 2012 at 01:15 PM
Rusty Cut, Printing paper dollars deflates the value of the currency, simply a default by a different mechanism. 50% drop in value by inflation or default is still a 50% drop in value. It makes the debt more risky to own, and investors are cheated just the same. This is not a good or honorable outcome.
Westfield Taxpayers August 07, 2012 at 09:19 PM
Yes, Sally, if $3.89 Million is required to maintain "AAA" rating, then that is what is required. Unless you are offering to pay the incremental $1,200, any reckless spending is a concern. Having $4M in the bank earns interest income rather than credit rating expense! It would be nice to have that $1M for a new fire truck in the "Rainy Day" fund instead of having to BOND for it. So your knee-jerk analysis is WRONG again!

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