A downgrade of Glen Rock’s municipal bond rating last month by Moody’s Investor Services seems not to have hindered the borough in a bond issuance earlier this month.
The winning bid on a sale by Glen Rock of $9.95 million in general improvement bonds on Jan. 8 comes with a 2.39 interest rate characterized as "very favorable" by borough auditor Gary Higgins, of Fair Lawn-based Lerch, Vinci & Higgins accountants.
“Although we had a downgrade we had a positive result,” noted Lenora Benjamin, the borough administrator.
A rating downgrade can often push interest rates up, and the borough had previously anticipated a rate on the 10-year bond of around 2.75 percent. Higgins said he believed the more favorable rate was based on the strong demographics of the town, which scores high on socioeconomic indices.
Standard & Poor’s, another prominent ratings agency, had scored the bond issuance with an A+ rating, though Moody’s dropped it slightly on Dec. 20, citing low reserve funds and constraints imposed by the state's 2 percent tax cap.
The low rate should save the borough roughly $72,000 in its 2014 budget, Higgins said, with varying levels of continued savings over the life of the bond, which would have otherwise been spent on servicing debt.
Servicing the debt will be about $205,000 cheaper than originally expected.
“This savings on debt service gives you a little bit extra this year if you want to put that in reserve,” Higgins told borough officials during a council work session late Monday afternoon.
From the 2012 to 2013 budget, the amount added to the capital reserve fund decreased from $650,000 to $200,000.Replenishing the surplus, which officials say has been diminished by uncollected taxes and tax appeals, was a goal spoken of by the council before the Moody’s downgrade. In a release explaining the decision, the agency said maintaining or increasing its reserves could increase the borough’s rating.