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Thursday, April 5, 2007

Mayor wants credit for making sun shine

So, Mayor Robinson-Briggs wants to take credit for Moody's upgrading the rating on Plainfield's debt.

PT understands wanting to get credit for things. He has always wanted to get credit for inventing sliced bread. Can't do it, though -- taken. As is credit for 'the best thing SINCE sliced bread' -- which leaves PT in third place, at best.

And that's about where Mayor Robinson-Briggs is on credit for Moody's upgrading the City's debt rating.

It's worth reprinting yesterday's brief item from the Courier before addressing the Mayor's claims --

Plainfield: Moody's upgrades the city's debt rating

Moody's Investors Service has upgraded the rating of the city's bond anticipation notes and long-term general obligation bonds.

"This favorable upgrade in our bond rating is the first in many years and reflects the administration's diligence and dedication in turning around the city's finances," said Mayor Sharon Robinson-Briggs.

The upgrade reflects Moody's belief that the city's financial position has stabilized, city officials said. The upgrade also means the interest rates on the city's bonds may decrease.

What Moody's likes

Moody's picture of an ideal community would be one with no crime, excellent schools and infrastructure and in which the town paid all of its obligations on time and spent none of its tax receipts, instead banking them all as reserves. In the real world, of course, adjustments must be made. And towns -- including Plainfield -- are rated by how close or far away they are from this 'ideal'.

Rating upgrade the 'first in many years'

Not true. Moody's gave Plainfield it's top BAN (bond anticipation notes) rating of MIG1 in the fall of 2005, which was the basis of the City's successful first-ever online auctions of BANs, and the subject of Plainfield Today's VERY FIRST POST --
"This is an exciting moment for the City," says Mayor Al McWilliams, "not only because we are participating in our first online auction, but because we just received a favorable rating letter from Moody's Investors Service."

"The letter notes the steps taken by my Administration to improve our financial situation through better management, a plan to build long-term reserves, and a stabilization of our $2.27 billion tax base.

"Further, while our rating of MIG1 for these notes is excellent, we are also encouraged that the rating letter, which gives the City an investment grade rating of Baa3, states that 'Moody's believes that audited fiscal 2005 results in line with unaudited estimates will likely result in a rating upgrade,' the Mayor concluded."

These ratings mean the financial community is regarding Plainfield in a better light because of improvements in the handling of the City's fiscal affairs (tax collection rate, building up of surplus, stabilization of tax base), and the City's bonds will be more desirable, making them easier to sell and at a more advantageous interest rate. [Emphasis added -- PT]
So, Mayor Robinson-Briggs' assertion is incorrect -- to put it charitably -- on its face. [If you're interested, you can read the results of that first online BANs auction here.]

'Turning around the city's finances'

Next, the Mayor attempts to take credit for 'turning around' the city's finances. As the citation from the 2005 BANs sale above notes, the administration of Mayor McWilliams had already done the groundwork that would allow, as Moody's said, an expected rating upgrade BASED ON THE AUDITED 2005 RESULTS, which is the basis for the upgrade Robinson-Briggs is trying to take credit for.

In truth, the city's ratings were impacted years ago, when the Plainfield Area Regional Sewerage Authority (PARSA) was set up. That involved selling off the old system -- the Plainfield Joint Meeting -- to form the new one. Though the value of Plainfield's assets was set at $36M, Assemblyman Jerry Green was able to convince the City Council (whose members were of his own picking) that Plainfield's BEST INTEREST was to settle for $9M, along with giving up its veto right in the new organization.

That Council, not content to sell off our patrimony at a 75% discount, proceeded to set up a trust fund for the $9M and then ignore the trust to use the money to balance successive budgets. All the while saying that the money would be replenished. Hah!

So, dear readers, now you understand a large part of the basis for needing to repair Plainfield's credit rating in the first place, and whom we have to thank for it.

'The city's financial position has stabilized'

Lastly, the Mayor asserts the City's financial position 'has stabilized'. Again, let PT point you toward the November 2005 posting cited above. The groundwork was all laid by the administration of Mayor McWilliams, in particular by the work of then Director of Finance and Administration Ron West, someone who was willing to continue under the current Administration, but was turned out.

But we should also not forget that Mayor Robinson-Briggs proposed to balance the current budget by USING THE SURPLUS. This would have meant that we would be looking not at a Moody's ratings UPGRADE, but in fact a DOWNGRADE if the Council had done as she proposed.

PT brought this all up in a post last September 28 titled "Financing Plainfield: The Devil is in the Details"
1. The Council breaks a sweat. Or if it doesn't, it should. The RATINGS LETTERS that accompanied the current BANs (both Moody's and Fitch's -- available for download from the City website --"Moody's rates Plainfield" (PDF) and "Fitch rates Plainfield" (PDF)--) highlight IMPENDING DANGER SIGNALS.

2. Robinson-Briggs proposes balancing the FY2007 budget (now under discussion) with $2.9M of the city's $3.1M RAINY DAY RESERVES -- essentially LEAVING THE FUND BROKE. That would be frittering away -- IN HER FIRST YEAR -- the reserves that Mayor Al McWilliams went out of his way to build up over the course of eight years. And we've got THREE YEARS TO GO?

3. This will have TWO CONSEQUENCES: The rainy day fund will be gone AND that will NEGATIVELY AFFECT OUR FINANCIAL OUTLOOK for the next sale of bonds or notes. Can you say HIGHER INTEREST RATES, costing the taxpayers even more?

The Council needs to look at this situation very carefully. The Devil, as they say, is in the details."

Thankfully, the Council did look at things very carefully, and saner heads did prevail.

Now the Mayor is faced with the problem of KEEPING or IMPROVING the Moody's rating -- which means, at the least, maintaining the high tax collection rate of the McWilliams years and continuing to build the surplus. Is she up to the task? Only time will tell.

But you will want to keep an eye on things. After all, it's YOUR tax dollars at stake here.

-- Dan Damon

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Anonymous said...

BRAVO!!!! GOOD FOR YOU, because if you let them continue with their creative way of coloring the facts. The Mayor/Assemblyman and the rest of their cronies would try to give her credit for making the flowers bloom in spring.