Moody's 2008 Report



Haddonfield (Borough of) NJ Municipality New Jersey

Moody's Rating

Issue                                                                                                                                                Rating

Water and Sewer Utility Bonds, Series 2008                                                                                    Aa3    Sale Amount          $4,936,000    Expected Sale Date   07/01/08    Rating Description   General Obligation Unlimited Tax

NEW YORK, June 25, 2008 -- Moody's has assigned a Aa3 rating to the Borough of Haddonfield's (NJ) $4.94 million Water and Sewer Utility Bonds, Series 2008.  Concurrently, Moody's has affirmed the Aa3 rating on the borough's $8.1 million in outstanding parity debt. Proceeds from the current issue, secured by the borough's general obligation unlimited tax pledge, will permanently finance $1.49 million in maturing bond anticipation notes and provide $3.98 million in new money for various water and sewer utility improvements. The Aa3 rating reflects the borough's mature and moderately-sized tax base with strong wealth levels, average debt burden, and healthy financial position.


Moody's expects that the borough's financial position will remain strong given taxpayer support for services and sound fiscal management. In fiscal 2006, the borough fully replenished the $1.7 million of appropriated reserves and added $1.2 million to fund balance, increasing Current Fund balance to $3.5 million or a healthy 25.9% of Current Fund revenues. Primary sources of fund balance replenishment included an increase in the school tax deferral ($848,000), excess property taxes ($781,000), nonbudgeted revenues ($460,000), and unexpected miscellaneous revenues ($221,000). Unaudited fiscal 2007 results indicate the borough replenished all but $270,000 of the higher $2.3 million of appropriated fund balance, decreasing Current Fund balance slightly to $3.22 million (a still healthy 25.1% of Current Fund revenues). Despite the modest draw down, the borough did not increase the school tax deferral to help replenish the appropriated fund balance for the first time in several years.  Primary sources of replenishment included excess property taxes ($766,000), nonbudgeted revenues ($400,000), unexpected miscellaneous revenues ($300,000), and lapsed appropriations ($261,000).

The borough defers payment of approximately $14.2 million (a sizeable 4.4 times Current Fund balance) of the local school tax levy, which represents 48% of the maximum statutorily allowable 50% of the school tax levy. Management typically maintains this deferred amount at the maximum level annually, but changed this practice in 2007 by not increasing the deferred amount. Moving forward officials intend to maintain the current deferred amount and may reduce it over time. The deferred amount represents an off-balance sheet liability, which Moody's believes could create fiscal vulnerability in the event that school property taxes are reduced. The majority of the borough's revenue is derived from property taxes (72.2% in fiscal 2007), supported by a strong tax collection rate averaging 99% on a current basis for the last seven years.

The proposed fiscal 2008 budget includes a $2.32 million reserve appropriation, which management expects to replenish from similar sources as in the past. Notably, the fiscal 2008 budget represents the first affected by a newly-adopted state property tax legislation which, aside from very specific exceptions, limits a municipality's property tax levy to 4% annual increases. Despite the borough's relatively high dependence on property taxes to support operations, due to conservative budgeting and close monitoring of expenditures, the borough was able to stay $137,000 below the 4% levy limitation with only a modest increase in reserve appropriation. The borough is expected to continue to closely manage its expenditures, but the new limitation may result in increased use of fund balance and/or less conservative budgeting practices over time. Future rating reviews will incorporate management's ability to maintain financial stability and current reserve levels in a more stringent legal environment. For more information on New Jersey's tax reform legislation, please refer to our special comment entitled "New Jersey Property Tax Reform Expected to Place Fiscal Pressure on Some New Jersey Municipalities" dated April 2007.


Haddonfield's moderately-sized $2.2 billion tax base will likely remain stable given the affluent and built out nature of the suburban community. Located in Camden County (rated A1), eight miles east of Philadelphia (rated Baa1/stable outlook), the 2.1 square mile borough is primarily residential (88% assessed value) with residents commuting to Philadelphia and the surrounding areas for employment via PATCO, a high-speed train with a station in the borough, I -295 and the New Jersey Turnpike. Assessed valuation growth has averaged less than 1% annually from 2003 to 2008, reflective of the built-out nature of the community, while equalized valuation growth averaged a stronger 9.2% over the same time period, capturing regional market appreciation, which slowed to approximately a quarter of the prior year's rate in 2008. The borough completed a revaluation that became effective in 2008. The borough prudently created a $150,000 tax appeal reserve in the 2008 budget, which officials believe will sufficiently cover the small number of pending tax appeals. New development is on hold pending the state's adoption of new affordable housing rules, which may occur at the end of the summer at the earliest. Management has adopted new zoning laws for its downtown area in preparation for a potential mixed-use development. Current growth primarily consists of tear downs of older housing stock replaced with new homes on the same site, as well as home additions. Income levels are roughly twice the national medians and one and one-half times the state medians, with equalized value per capita at a strong $188,849 (132% of state median).


The borough's debt position will likely remain manageable given moderate future borrowing plans. The borough's direct debt burden is average at 0.7% of equalized valuation, and increases to a still average 2% when accounting for the borough's pro rata share of overlapping county and school district debt obligations. Debt service comprised a moderate 7.2% of 2006 operating expenditures, reflecting the below average amortization of principal (55.8% retired in 10 years). Officials anticipate issuing approximately $1 million to $1.5 million annually in short term notes for capital needs for the next three years. A new library project may result in an additional $5 million borrowing in the medium to long term. The borough has historically issued bond anticipation notes before permanently financing them as market conditions dictate. The borough has no exposure to variable rate debt or derivative products.


2006 Population: 11,515 (1.2% decrease since 2000)

2008 Equalized value: $2.2 billion

2008 Equalized value per capita: $188,849

1999 Per Capita Income (as % of NJ and US): $43,170 (160% and 200%)

1999 Median Family Income (as % of NJ and US): $103,597 (159% and 207%)

Direct debt burden: 0.7%

Overall debt burden: 2%

Payout of principal (10 years): 55.8%

2006 Current Fund balance: $3.5 million (25.9% of Current Fund revenues)

2007 Current Fund balance (unaudited): $3.2 million (25.1% of Current Fund revenues)

Post-sale Parity Debt Outstanding: $13 million

ANALYSTS: John Medina, Analyst, Public Finance Group, Moody's Investors Service Elizabeth Bergman, Backup Analyst, Public Finance Group, Moody's Investors Service  Geordie Thompson, Senior Credit Officer, Public Finance Group, Moody's Investors Service

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

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