By Lauren Otis, Staff Writer
Despite the widespread and ongoing upheaval in the credit markets, finance officers at area municipalities say they have not encountered any problems issuing long-term debt.
”It does not seem to be a real problem for us,” said Kathryn Monzo, chief financial officer of Princeton Township.
Ms. Monzo said she had heard of one county and one municipality in New Jersey that planned on offering new bond issues but had failed to find bidders for the debt. Ms. Monzo said she believed these were isolated instances which related more to the specific debt issue than the market in general.
In an unstable market investors tend to turn toward municipal bonds as an investment, Ms. Monzo said. The township has a Triple A rating by credit agencies — one of only a handful out of New Jersey’s 566 municipalities — “which helps you out certainly when you go out to the bond market you’ll get more bidders and you’ll get a better rate,” she said.
When a municipality borrows money to pay for capital improvements or other bonds, the amount of interest that it pays is dependent on its credit rating.
Princeton Township will be moving forward with a refinancing of $9.6 million in general improvement bonds, and Ms. Monzo said she doesn’t anticipate any problem refunding the debt at an advantageous rate.
West Windsor Township also has a Triple A credit rating, said Joanne Louth, West Windsor’s chief financial officer. West Windsor is not planning any debt issues in the immediate future, but its Triple A rating “absolutely will provide more security toward any future issue,” Ms. Louth said.
Ms. Louth said the West Windsor Township Committee recently approved an authorization for bonds to be issued for a sewer project, and she received a phone call from a securities firm interested in the issue. Ms. Louth said she told the firm the issue was still in the works.
”I was pleasantly surprised that I received that phone call in light of the economic circumstances,” she said.
Ms. Louth did say that there has been some disruption in the market for bond anticipation notes, short-term municipal debt with terms of a year or less, although West Windsor has not been affected. On Sept. 18, nobody bid on such notes all day, which would have been a real problem if a municipality had to roll over notes on that day, she said.
Ms. Monzo also said she understood there was “some difficulty out in the market” for bond anticipation notes.
”No, I don’t think we’ll see much impact” from the upheaval in credit markets, said Sandra Webb, Princeton Borough’s assistant administrator and chief financial officer. “The market still looks for municipal bonds and the Princeton name sells well,” Ms. Webb said.
”I’ve heard that the bidding is down but I don’t know that specifically because we haven’t been in the market recently,” Ms. Webb said.
Despite the slow economy, and turbulence in the stock market, the borough has not seen an increase in non-payment of taxes, Ms. Webb said.
”For the moment we are doing OK, people are paying their taxes,” she said. “We are keeping our fingers crossed.”
The Princeton Township’s tax collection rate has continued to be excellent, Ms. Monzo said.
In some cases, a municipality’s Triple A bond rating may result from the insurance it has purchased on the bond.
”Insurance provide us with a Triple-A bond rating on debt, which in turn reduces the amount of interest we pay, thereby benefiting the township,” Lawrence Township Municipal Manager Richard Krawczun said Monday. “But if the rating of an insurer goes down, your (bond) rating goes down. It could pull our rating down and the cost of the insurance that we buy would go up. It could cause our interest rates that we pay on borrowed money to go up.”
Mr. Krawczun questioned the financial market’s impact in the mid to long term on the township’s ability to get credit. Difficulty in getting credit does not necessarily mean a municipality is a credit risk — it’s just that there is no money to be loaned, he said.
There were towns in New Jersey recently that were good credit risks and that sought bond anticipation notes, which are short-term loans until permanent financing can be put in place, he said. Those towns did not receive any bids, because there was no capital in the market to be loaned to them, he said.
”I think what this all means is that (the financial crisis) will have some impact on municipal finances, but it may not be felt immediately,” he said. “There are going to be other influences on the budget process which are distinctly separate from Wall Street that may further exacerbate the negative pressure on the budget.”
Economic restraints may also make it more difficult for residential and commercial property owners to pay their real estate taxes, Mr. Krawczun said.
”One of the biggest concerns is taxpayers’ ability to pay property taxes because of the impact of the market on the finances of businesses and individuals who are dependent on income from various investments, which has been reduced,” he said.
Mr. Krawczun said he is especially concerned about commercial property owners. If a commercial property becomes vacant and the owner is unable to re-rent it or rents it at a reduced rent, the owner may file a property tax appeal. Commercial property assessments are determined by the income approach — the amount of money generated by rents.
Residential property owners also may have a difficult time paying their property taxes, he said. Residents may not be able to pay for permits or licenses or registration fees for activities, which are counted as a source of budget revenue, he said.
Lea Kahn of The Packet Group also contributed to this story.

