Township nets good rate on bond sale

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Egg Harbor Township bond sale interest rate

EGG HARBOR TOWNSHIP – Despite a recent downgrade in the township’s economic outlook by Standard and Poor’s Rating Service on Aug. 13, the administration fared very well at a recent bond sale, according to Township Administrator Peter Miller.

On Aug. 22, the township bundled its short-term debt from 2009-2012 as one $7.8 million bond and entered the bidding market with an expectation of getting an interest rate on the financing close to 2.1 percent.

“We thought we were looking pretty good going into it,” Miller said. “But we were very happy with the rates we got. They were outstanding.”

The township’s bond received bids from six individuals, and the winning bid was a rate of 1.774 percent over a 10-year term.

Miller said by securing a lower interest rate than anticipated on the debt, the township was able to save about $20,000 per year or $200,000 over the life of the loan.

The township’s rating by the S&P has been AA- for the past four to five years and that remains unchanged, Miller said. But earlier this month, the rating service revised the outlook on the township’s general obligation debt from stable to negative, a result of the township’s reduction in fund reserves, a change that could have affected the offers that came in during the bid process.

 Miller said after the bids were closed, he went back through the system to see how the township’s offers compared with other municipalities, in light of the changed outlook.

“We were tied for the lowest interest rate with one other town in Indiana. All of the other towns had 2-to 3-percent interest rates,” he said, noting that not all of the bonds were for the same amount or same loan duration. “I was able to conclude that our negative outlook didn't deter any bids or affect our ability to get low rates.”

Miller credits the township’s stability as a possible reason. “We are one of the only municipalities in Atlantic County that has not had their rating downgraded since 2008.”

S&P, a financial services company that evaluates companies and governmental agencies on credit worthiness, states that Egg Harbor Township's rating reflects assets such as a “growing local economy with access to Atlantic City for additional employment opportunities, sizable property tax base with strong wealth and income and moderate debt with limited additional capital needs.”

In the rating system with AAA as the highest mark, the AA- rating is the fifth highest an entity can receive and shows stability to economic changes and circumstances and an ability to meet financial obligations.

The agency states if the township can return its reserve funds to previous levels, it would revise its outlook within a two-year period and restore it to “stable.” Otherwise, if those levels dip lower it could lower the rating itself.

Read more on another town's bond sale process: OC looks to hold bond sale early, citing EHT's favorable rates as reason. 

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