Wall St. warning: Township hasn't cut spending to meet tax drop
Wall Street scolds Newtown Township, Bucks County over financial "deterioration"
Wall St. warning: Township hasn't cut spending to meet tax drop
Joseph N. DiStefano
Affluent Newtown Township, Bucks County (where the median family income is over $92,000, almost double the Pennsylvania average) has had its credit rating cut two notches, to Aa3 from Aa1, by Moody's Investors Service, which says the local government has been spending more than it brings in.
Moody's downgraded $9.8 million in general-obligation bonds, raising the possibility the town will have to pay future investors more to buy its bonds, the next time it borrows money.
The agency cited falling tax revenues, rising budget deficits, and "deterioration of the township's reserves and cash position." The township's general fund balance fell to $1 million in the last fiscal year, from $3 million three years earlier, while income taxes, which pay more than half the township's bills, have fallen more than 6% since the start of the recession, Moody's analyst Kristina Piccareto noted.
Despite the evidence, "we are not spending beyond our means, which would signify spending has increased dramatically in the last few years," said Robert L. Ciervo, head of the township's elected Board of Supervisors and a learning-center manager at Rutgers University in Camden. He said the Moody's downgrade won't much affect Newtown Township because "I don't see us (borrowing) money, probably, in the next ten, fifteen years." The downgrade doesn't affect current fixed-rate debt, which was issued when the township had more money and a higher credit rating.
Ciervo is proud of holding the line on township spending, which he said is rising only modestly, to $10.8 million next year, from $10.5 million in fiscal 2007, before he was elected. But Moody's expects more if the town is to maintain a higher rating: either higher taxes (Newtown's property taxes are low, by suburban standards), or spending cuts.
Newtown prospered in the building boom of the last 25 years, but major employers like military contractor Lockheed Martin have been cutting jobs and laying off workers, reducing tax receipts. This year's budget "is expected to improve slightly" as police and firefighters accepted lower pay increases and the township laid off five workers, saving $500,000 a year, the analyst wrote. But higher healthcare and pension costs and weak tax collection growth will "limit the township's ability" to boost its cash reserves.
Nationally, Moody's cut more than five times as many municipal ratings as it boosted in the third quarter, the worst ratio since the 2008 credit market freeze, as more towns showed signs of falling behind on their bills.
Moody's also cut Margate City's credit rating by a notch yesterday. Communities in Camden, Chester, Montgomery and Burlington Counties, among others, have also seen their ratings cut or face "negative outlook" warnings of possible future ratings cuts in recent months, due variously to falling property tax collections, failed economic-development projects, and local government refusal to boost taxes or cut spending.
Pot, Meet Kettle???— Joe Nickels- Oh Wall Street - that needed the largest bailout in this history of the planet. OK, thanks for that, O monetary experts......Oh and there's Moody's again - cited without aside.— CiceroSpuriousDeodatus
- Hey everyone! I'm quoting Moody's! They cosmically missed the subprime blow-up of 2007! -- And is Wall Street even relevant anymore? -- No, except when places like Newtown Township KEEP GOING THERE TO BORROW MILLIONS OF DOLLARS! -- Cicero. Ha.— Joe D
- Sacking 5 employees saves $500,000. Don't you just love it? Were they secretaries?— Wilhelm Von Humboldt
- Wil, would we feel better if they were public safety officers, not secretaries? I figure it probly keeps $100k/head at least to keep an officer on the street - pay, insurance, car. You figure the benefit is typically a lot greater than that?— Joe D
I understand that tax hating true freedom loving libertarians are planning to set up naval/island freedom havens in the open sea. I can't wait until they go,either they will stay out there and not annoy us with their stupidity or be murdered by pirates. It's a win-win either way. Maybe Wall St will go with them for the tax advantages.- We saved money not just through layoffs but restructuring the health insurance plan and also finding agreement on smaller raises for the fire and police officers that accepted the new contract. Moody's basically wanted us to raise taxes to have an artificially higher reserve fund then the state calls for (the state calls for us to have 5% of operating expenses in reserve each year and even now we still have 10%) just so we would be attractive to bond companies to borrow even more money. We have made a point in Newtown of not taking on new debt until we pay down old debt. We paid off an open space purchase before borrowing new money in 2008 to build a bigger municipal complex (the old complex was built when the town had much less people than it's current population of 20,000).— rlc18940
