By PHIL NOBILE
The Town of Harrison recently received a bond credit ratings boost according to research from one of the largest credit rating businesses in the world. Moody’s Investors Service—the bond credit rating business of Moody’s Corporation—measures the creditworthiness of a corporate or governmental entity based on a standardized scale and upgraded Harrison’s ranking this past month.
But, the agency attributed questionably high tax rates and layoffs as the main reasons for why the town is now able to paint a better financial picture.
According to the Oct. 24 findings, the credit rating service upgraded the town’s rating from Aa3 to Aa2 with $64 million in outstanding debt remaining.
Moody’s ranking system ranges from an Aaa rating, which is considered “rated as the highest quality and lowest credit risk,” to a C rating, which is “rated as the lowest quality, usually in default and low likelihood of recovering principal or interest.” An Aa2 rating is two levels lower than a Aaa, and is considered “high quality and low credit risk,” but not the highest or lowest possible.
After dipping down to a Aa3 rating in 2008 due to the country’s economic woes, Harrison has been on an “upswing” ever since, according to Town Comptroller Maureen MacKenzie.
“It’s very important for the town,” MacKenzie said. “When people see the ratings boost, they look at the town as a whole. We can borrow cheaper because of our rate, it saves people of the town a lot of money. There’s going to be more businesses coming in when people see that the financial future of the town is good.”
The October report states that “the Aa2 rating incorporates the town’s improved financial position, sizeable and affluent residential and commercial tax base, and a manageable debt burden with a lower than average pension liability.”
In a different October report, Moody’s declared that, generally, local governments and municipalities should be expecting downgrades in the near future. According to Vito Galluccio, a municipal government bond analyst from Moody’s, Harrison differed from other municipalities thanks to consecutive surpluses in operating funds and reserve growth.
“I think the upgrade speaks to the improvement in their finances,” Galluccio said. “The reason why the village had experienced rating downgrades in previous years had to do with its finances becoming more narrow because of the poor economy. They’ve been able to turn it around since that time.”
According to the Harrison-specific report from Moody’s, all proceeds from the new $8.5 million in the town’s general obligation bonds will finance a variety of projects for the town, mainly infrastructure changes and improvements to water tanks, town drainage issues and tax certioraris.
MacKenzie said that the expected new tax certioraris, which are legal challenges from property owners to reduce real estate tax assesment, from bigger companies entering the area will not put Harrison’s rating at any risk.
“We do have some large certioraris coming in, but, at the same time, there is a lot of building going on,” MacKenzie said. “So, there will be a decrease [in taxable base] when these big companies come in, but it won’t do us in at all.”
Moody’s expects Harrison to end 2013 with a fourth consecutive surplus, bringing the fund reserves to $12.8 million, or 18 percent, of revenue. The company attributes the major increase to a multitude of measures from the Town Council, including a 10 percent property tax increase and the elimination of 40 staff positions in the town over the past decade, both which “reduced salary expenditures by more than $4 million annually.”
Yet, over the course of several years Harrison raised property tax levels at an astounding rate. Between 2009 and 2012, the town raised taxes by 32.5 percent, and raised it another 3 percent for 2013.
Town positions have been decreased from 318 in 2008 to 267 by 2014. According to MacKenzie, the positions lost were in multiple departments across town government, from the police and fire departments to public works and town offices. MacKenzie also said that absolving positions also helped with the lowering of salary expenditures.
The most recent economic prognosis for Harrison is the highest improvement since the economic turmoil of 2008, which caused a $4.4 million, or 8.4 percent, decrease in reserve funding in 2009.
Since then, the town’s financial situation has increased rapidly, going from $129,668 in funds in 2010 to $7.7 million by the end of 2012.
“Salaries are up, employee count will remain steady, no one-shots in the budget, so they will most likely reaffirm the rating over the next several years. We have a hefty fund balance, so I think we’re on the right road,” MacKenzie said.
As for future reports, Galluccio believes that Harrison remaining on its current trend will allow for maintaining of their new rating.
“I will say that a Aa2 is a very high rating,” Galluccio said. “The more improvements [Harrison] makes in their finances, and the more they continue on that trend, will be factored in during future rating reviews.”
Harrison Mayor Ron Belmont, a Republican, could not be reached for comment as of press time.