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New Issue:

MOODY'S ASSIGNS Aa2 RATING TO EDISON TOWNSHIP'S (NJ) $18.9 MILLION GENERAL OBLIGATION REFUNDING BONDS, SERIES 2011

08 Jun 2011

AFFIRMS APPROXIMATELY $68.2 MILLION OF RATED DEBT OUTSTANDING; OUTLOOK IS STABLE

Municipality
NJ

Moody's Rating

ISSUE

RATING

General Obligation Refunding Bonds, Series 2011

Aa2

  Sale Amount

$18,900,000

  Expected Sale Date

06/15/11

  Rating Description

General Obligation

 

 
Moody's Outlook   Stable
 

Opinion

NEW YORK, Jun 8, 2011 -- Moody's has assigned a Aa2 rating with a stable outlook to Edison Township's $18.9 million General Obligation Refunding Bonds, Series 2011. Concurrently, Moody's has affirmed the town's long-term rating of Aa2 with a stable outlook, affecting approximately $68.2 million of outstanding general obligation bonds, including the current issue. The bonds are secured by the town's general obligation unlimited tax pledge. The refunding bonds will refund G.O General Improvement Bonds, Series of 2002 with estimated net present value savings of 7% or $1.2 million, with the savings taken throughout the life of the bonds and no extension to the original maturity date.

RATING RATIONALE

Moody's Investors Service has affirmed Edison Township's (NJ) Aa2 long-term rating with a stable outlook, affecting $68.2 million in debt. The Aa2 rating reflects the town's large tax base with above average wealth levels, manageable debt burden and improving financial position. The stable outlook reflects the stabilization of the township's financial position to a level that provides satisfactory financial flexibility.

STRENGTHS

-Large tax base with above average wealth levels

-Manageable debt burden

CHALLENGES

-Slight decline in the property tax assessed valuation

IMPROVING FINANCIAL POSITION

Moody's believes that the township will be able to maintain stable operations and a satisfactory level of reserves, based on improved results in fiscal 2010, which should augment the stable but narrow results of the prior four years. Based on audited results from fiscal 2006 through 2009 , the township demonstrated steady operations with narrow Current Fund balances approximating 4% of revenues. In fiscal 2010, the township significantly increased reserves by changing from a fiscal year that ended on June 30th to a calendar year which ends December 31st. During the interim year (July 1 - Dec 31, 2009) the township received over 90% of state aid for the year (which is 17% of revenues), but paid approximately two-thirds of the expenditures. As a result, the Current Fund balance grew to $12.8 million, which is equivalent to 10.34% of Current Fund revenues, significantly up from $4 million or 3.43% of Current Fund revenues the prior year.

Despite being the result of a one-time change, this enhanced financial position is expected to persist due to a new management team's efforts to control costs and increase operational efficiencies. The township has implemented lasting operational savings including eliminating 50 positions and minimizing uniform personnel overtime by hiring civilians to perform administrative job functions. Looking forward to fiscal 2012, management is working to maintain the Current Fund balance by reducing reliance on using reserves to balance budgets. Future rating reviews will factor in the town's ability to maintain structural balance while maintaining reserves.

SUBSTANTIAL AND DIVERSE TAX BASE SUPPORTS MOODY'S EXPECTATION OF CONTINUED ECONOMIC STABILITY

Moody's expects overall continued economic stability for Edison's diverse $16.1 billion tax base, despite having lost assessed value in each of the past three years (-3.4% total since 2008). The losses are attributable to the national economic decline. Edison, with a population of just over 100,000, is the fifth largest municipality in the state. Located in central New Jersey, Edison's valuation base includes a large commercial/industrial component which accounts for 30% of the township's valuation. Included in the base is the Raritan Center complex, which employs an estimated 15,000 individuals with Fortune 500 companies including Aramark B3/Stable), Automatic Data Processing (Aaa), Avery Dennison (Baa2/Stable), Cardinal Health (Baa3/Stable), Costco (A2/Positive), Electronic Data Systems (A2/Stable), FedEx (Baa2/Stable), Ingersoll-Rand (Baa1/Stable), Lucent Technologies (B1/Stable), Nabisco/Kraft (Baa2/Stable) and Verizon Communication (A3/Stable). In addition, major employers outside the center includes JFK Medical Center and Exxon Mobil (Aaa/Stable). The township's prime location has allowed for the growth of transportation-based industries such as warehouses and shipping hubs. The Gund building site has reportedly been purchased by Colavita America and the New York Times building and Revlon sites are being redeveloped. Wealth indicators exceed state and national medians, and full value is a strong $161,663 per capita, reflecting in part the city's notable commercial/industrial presence.

MODEST DEBT POSITION WITH LIMITED BORROWING PLANS

Moody's believes that the township's debt position is manageable, as characterized by a modest net direct debt burden of 0.4% of equalized value and overall net debt 1.2% of equalized value, which includes overlapping debt with Middlesex County (Aa1/Negative). Debt service comprises 9.5% of the total operating budget but the township has a rapid average principal payout of 77.9% in ten years. The township has moderate borrowing plans in the near term which includes $1.7 million of authorized but unissued debt which will be used primarily for street improvements and equipment replacement. All of the town's debt is fixed rate and the town is not party to any derivative agreements.

What could make the rating go UP:

-Maintain stable operations and increase reserves

What would make the rating go down:

-Use of Current Fund balance for operations and the resulting diminishment in reserves

-Continued decline in the township's assessed valuation

KEY STATISTICS:

2008 Population: 99,706

2009 Full Valuation: $16.1 billion

2009 Full Value Per Capita: $161,663

1999 Per Capita Income (as % of NJ and US): $30,148 (111.6% and 135.7%)

1999 Median Family Income (as % of NJ and US): $77,976 (119.3% and 155.8%)

Direct Debt Burden: 0.4%

Overall Debt Burden: 1.2%

Payout of Principal (10 years): 77.9%

FY09 Current Fund balance: $4 million (3.34% of Current Fund revenues)

FY09 Current Fund balance (unaudited): $12.8 million (10.34% of Current Fund revenues)

Parity rated G.O. Debt Outstanding: $68.2 million

The principal methodology used in this rating was General Obligation Bonds Issued by U.S. Local Governments published in October 2009.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings and public information.

Moody's Investors Service considers the quality of information available on the credit satisfactory for the purposes of assigning a credit rating.

Moody's adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

Analysts

Shannon McCue
Analyst
Public Finance Group
Moody's Investors Service

Josellyn Yousef
Backup Analyst
Public Finance Group
Moody's Investors Service

Julie Beglin
Senior Credit Officer
Public Finance Group
Moody's Investors Service

Contacts

Journalists: (212) 553-0376
Research Clients: (212) 553-1653


Moody's Investors Service
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New York, NY 10007
USA

MOODY'S ASSIGNS Aa2 RATING TO EDISON TOWNSHIP'S (NJ) $18.9 MILLION GENERAL OBLIGATION REFUNDING BONDS, SERIES 2011
No Related Data.
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