Collingswood Credit Woes Vanish with AA- Bond Rating from S&P

For the first time in more than two years, Collingswood residents have received stunningly positive news about the borough credit rating.

Collingswood has been rated "AA-" by Standard & Poor's (S&P), the second-best available rating issuable by the agency, and the best the borough has ever received in its financial history, officials said.

"When they banged us before, they called it a 'super downgrade'," Collingswood Mayor James Maley said in a video message accompanying the announcement. 

"Well, this is a super upgrade."

The borough credit rating has never been higher: an "AA-" reflects a stable outlook for Collingswood finances and reflects its "very strong capacity to meet financial commitments, "according to S&P. 

The agency does not expect to re-rate Collingswood within the next two years.

"That's a six-notch increase," Maley said in his video address, adding that it was "refreshing" to see a rating agency "look at the numbers objectively and review them all."

Collingswood was battered by its prior rating agency, Moody's Investor Service, which dropped the borough to a Ba1, or "junk" status, leading a frustrated Maley to quip, "Greece has a better rating than we do."

In 2012, it was even recommended to the Collingswood school district that it should seek its own independent investment rating before a bond refinancing rather than tie its fortunes to Moody's assessment of the town.

Maley praised the S&P ratings mechanism as being far more transparent than the dealings with Moody's, calling it "light years different than the process we went through in 2011."

"Anyone can download their app from the App Store and plug the numbers in to see where a town stands," Maley said in a statement.

Unlike Moody's, S&P took into consideration that the borough has $90 million tied up in revenue-generating redevelopment projects such as the Old Zane School and the Collings at the LumberYard.

Eight of the 13 LumberYard units have been sold with another rented, and a waiting list of 30 people for the 70 units in the apartment building, the mayor said. About two-thirds of the debt will be retired in the next ten years, which will be "in line" with revenues generated by the projects. 

"During this time we've been rolling over notes, we've been paying down our debt," Maley said in his address. 

"The projects that we have done generate extra revenue," Maley said. "We use that to cover the debt for a period of time. 

"We'll get back to fully taxed revenues, and we'll have ratables that will have increased; that will have gone higher for us than we would have without these projects," he said.

According to a statement from the borough, the report from S&P noted that the financial strengths of Collingswood as its:

• Adequate economy, which benefits from participation in the broad and diverse economy of the region;
• Adequate budgetary flexibility, with 2012 audited current fund reserves at 5.9% of current fund expenditures;
• Strong budgetary performance, which takes into account a revenue stream S&P considers stable;
• Very strong liquidity providing very strong cash levels to cover both debt service and expenditures;
• Strong management with good financial policies; and
• Very weak debt and contingent liability profile.