MOODY’S GOES NEGATIVE ON RED BANK DEBT

just_in1By JOHN T. WARD

Wall Street debt-rating agency Moody’s has raised concerns about Red Bank’s $25.2 million worth of general-obligation bonds.

In a announcement posted on its website late last Friday, Moody’s affirmed its prior Aa3 rating on the debt, but revised its outlook to “negative,” citing a drop in the town’s current-fund balance to 2.14 percent of revenue in 2010, from 9.14 percent in 2007.

The agency indicated that a downgrade of the debt could follow if “recent fiscal strain” continues.

Republican council candidate Joe Mizzi, who raised concern about debt levels at last month’s candidate’s debate, seized on the report, offering it as evidence that “Red Bank cannot sustain these debt levels.”

If elected, he said he “would use surpluses in the water fund to pay down debt.”

Borough officials, however, countered the Moody’s rationale for the revision, while calling attention to the affirmation of the bond rating, which Councilman Mike DuPont, who chairs the governing body’s finance committee, called “the highest you can get.”

“That in and of itself means we’re operating with solid financial principals,” he said. “But it is also a notice that we have to build our surplus back up, which is a goal we already have.”

Chief Financial Officer Colleen Lapp confirmed that the general fund surplus had declined to $409,000 at the end of 2010, from $1.58 million at the end of 2008.

But like DuPont and Mayor Pasquale Menna, she attributed the decline in large part to a drawdown of surpluses mandated by Governor Chris Christie in order to cushion taxpayers against rising local property taxes.

“Of course it is,” Lapp told redbankgreen. “Governor Christie has made it clear that he doesn’t think there’s a need for large reserves, and they should be used for ta relief.”

Menna suggested that Moody’s was penalizing Red Bank, and presumably other municipalities and school districts, for following “the boss’ orders.”

Even with the drawdowns, though, the three officials said that Red Bank had dealt well with adverse conditions in getting concessions from unions and cutting other costs to keep the growth of the budget in check.

“They’ve been thrown some curveballs and taken them in stride,” said Lapp, who replaced Frank Mason as CEO in August.