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Moody's Upgrades Town of Harrison's (NJ) Long-Term GO Rating t


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Things seem to be heading in the right direction. Kudos to all those involved in helping put things back on track.

http://www.moodys.com/research/Moodys-Upgrades-Town-of-Harrisons-NJ-Long-Term-GO-Rating--PR_246496

Global Credit Research - 21 May 2012

Rating Action Affects Approximately $23.9 Million of Outstanding Parity Debt

New York, May 21, 2012 -- Moody's Investors Service has upgraded the Town of Harrison's (NJ) long-term general obligation rating to Ba2 from Ba3, affecting $23.9 million of outstanding parity debt. The outlook is stable. This action concludes our review for upgrade of the town's GO rating, which began on March 16, 2012.

SUMMARY RATINGS RATIONALE

The upgrade to Ba2 from Ba3 reflects several positive developments for the town, including demonstrated market access for its 2012 Tax Anticipation Note (TAN), which provides cash flow for its operations, including for debt service. The town sold the TAN on April 27, 2012 through a negotiated sale. The town also receives additional, although limited, financial support from the State of New Jersey (GO rated Aa3) and has been admitted into the New Jersey Qualified Bond Program.

Incorporated into the Ba2 rating and stable outlook is the continued near-term uncertainty regarding $1.2 million of anticipated property tax payment, net of a reserve for delinquent taxes, from the town's largest tax payer, Red Bull Arena. Although a recent court ruling requires the Red Bull Arena to pay current and delinquent property taxes, the arena has not made payment.

The stable outlook also reflects structural improvements to financial operations evidenced by a fiscal 2012 budget that balances sharply escalated debt service with higher recurring property tax revenues and lower expenditures.

STRENGTHS

-Demonstrated support from state for cash flow financing efforts

-Recent structural improvements to financial operations

-Additional financial flexibility afforded by a levy cap bank of $2.25 million

CHALLENGES

-Delinquent property taxes from largest tax payer, Red Bull Arena

-Enterprise and development-related risk

-Significant debt with high annual debt service

-Market access risk arising from the continued reliance on cash-flow notes to fund operations

-Low Current Fund balance

Outlook

The stable outlook reflects structurally improved financial operations and a levy cap bank of $2.25 million that offset uncertainties surrounding the realization of anticipated Red Bull property tax revenue.

WHAT COULD MOVE THE RATING UP:

*Collection of delinquent and current property tax payments from Red Bull Arena

*Maintenance of additional financial flexibility in the forms of substantial levy cap bank or liquid reserves

*Continued collection of historical and projected developer PILOT payments and reimbursements

*Structurally balanced financial operations

*Improved financial operations with growth in Current Fund balance and reduced reliance on cash flow borrowing

WHAT COULD MOVE THE RATING DOWN:

*Limited future market access for cash flow borrowing or increased cash flow borrowing in relation to the budget

*Inability to adequately manage failed collection of Red Bull property tax revenue

*Weakened financial operations

*Future debt issuances that materially increase the town's debt burden

*Further deterioration of the town's tax base

The principal methodology used in this rating was General Obligation Bonds Issued by U.S. Local Governments published in October 2009. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Information sources used to prepare the rating are the following: parties involved in the ratings, public information, and confidential and proprietary Moody's Investors Service's information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as © the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Josellyn Yousef

Analyst

Public Finance Group

Moody's Investors Service, Inc.

250 Greenwich Street

New York, NY 10007

U.S.A.

JOURNALISTS: 212-553-0376

SUBSCRIBERS: 212-553-1653

Julie Beglin

Vice President - Senior Analyst

Public Finance Group

JOURNALISTS: 212-553-0376

SUBSCRIBERS: 212-553-1653

Releasing Office:

Moody's Investors Service, Inc.

250 Greenwich Street

New York, NY 10007

U.S.A.

JOURNALISTS: 212-553-0376

SUBSCRIBERS: 212-553-1653

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Guest Guest

Kudos to all involved? I bet we could get the bond rating even higher, if we lay off more employees, and raise taxes again. The Red Bulls, and the developers, have all completed their project and are raking it in, at the expense of the taxpayer. Kudos should be given to the Red Bulls and developers for pulling a fast one on the town, and taxpayers.

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Guest Bluetide

Looks like Harrison is heading in the right direction. It's a tough time to be Mayor of Harrison, and you have to give Ray credit to doing the hard things such as layoffs and reduction in the manpwer of the Police and Fire Dept. The next thing to do is to retire the present Chief and hire a Police Director at the same price as the Fire Director.

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Guest BlueTideBacker

Things seem to be heading in the right direction. Kudos to all those involved in helping put things back on track.

http://www.moodys.co...ting--PR_246496

Global Credit Research - 21 May 2012

Rating Action Affects Approximately $23.9 Million of Outstanding Parity Debt

New York, May 21, 2012 -- Moody's Investors Service has upgraded the Town of Harrison's (NJ) long-term general obligation rating to Ba2 from Ba3, affecting $23.9 million of outstanding parity debt. The outlook is stable. This action concludes our review for upgrade of the town's GO rating, which began on March 16, 2012.

SUMMARY RATINGS RATIONALE

The upgrade to Ba2 from Ba3 reflects several positive developments for the town, including demonstrated market access for its 2012 Tax Anticipation Note (TAN), which provides cash flow for its operations, including for debt service. The town sold the TAN on April 27, 2012 through a negotiated sale. The town also receives additional, although limited, financial support from the State of New Jersey (GO rated Aa3) and has been admitted into the New Jersey Qualified Bond Program.

Incorporated into the Ba2 rating and stable outlook is the continued near-term uncertainty regarding $1.2 million of anticipated property tax payment, net of a reserve for delinquent taxes, from the town's largest tax payer, Red Bull Arena. Although a recent court ruling requires the Red Bull Arena to pay current and delinquent property taxes, the arena has not made payment.

The stable outlook also reflects structural improvements to financial operations evidenced by a fiscal 2012 budget that balances sharply escalated debt service with higher recurring property tax revenues and lower expenditures.

STRENGTHS

-Demonstrated support from state for cash flow financing efforts

-Recent structural improvements to financial operations

-Additional financial flexibility afforded by a levy cap bank of $2.25 million

CHALLENGES

-Delinquent property taxes from largest tax payer, Red Bull Arena

-Enterprise and development-related risk

-Significant debt with high annual debt service

-Market access risk arising from the continued reliance on cash-flow notes to fund operations

-Low Current Fund balance

Outlook

The stable outlook reflects structurally improved financial operations and a levy cap bank of $2.25 million that offset uncertainties surrounding the realization of anticipated Red Bull property tax revenue.

WHAT COULD MOVE THE RATING UP:

*Collection of delinquent and current property tax payments from Red Bull Arena

*Maintenance of additional financial flexibility in the forms of substantial levy cap bank or liquid reserves

*Continued collection of historical and projected developer PILOT payments and reimbursements

*Structurally balanced financial operations

*Improved financial operations with growth in Current Fund balance and reduced reliance on cash flow borrowing

WHAT COULD MOVE THE RATING DOWN:

*Limited future market access for cash flow borrowing or increased cash flow borrowing in relation to the budget

*Inability to adequately manage failed collection of Red Bull property tax revenue

*Weakened financial operations

*Future debt issuances that materially increase the town's debt burden

*Further deterioration of the town's tax base

The principal methodology used in this rating was General Obligation Bonds Issued by U.S. Local Governments published in October 2009. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Information sources used to prepare the rating are the following: parties involved in the ratings, public information, and confidential and proprietary Moody's Investors Service's information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for ( B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as © the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Josellyn Yousef

Analyst

Public Finance Group

Moody's Investors Service, Inc.

250 Greenwich Street

New York, NY 10007

U.S.A.

JOURNALISTS: 212-553-0376

SUBSCRIBERS: 212-553-1653

Julie Beglin

Vice President - Senior Analyst

Public Finance Group

JOURNALISTS: 212-553-0376

SUBSCRIBERS: 212-553-1653

Releasing Office:

Moody's Investors Service, Inc.

250 Greenwich Street

New York, NY 10007

U.S.A.

JOURNALISTS: 212-553-0376

SUBSCRIBERS: 212-553-1653

Why would you feel a need to type that entire article when everyone's already read it in the Star-Ledger??

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  • 2 weeks later...
Guest Guest

I’ve heard it said that the definition of insanity is doing the same thing and expecting different results. By that definition perhaps the majority of the voters in Harrison over the last nearly 20 years are insane, as they’ve elected individuals from the same political clique throughout this time and yet constantly seem shocked by the terrible management and poor effectiveness of the administration.

First, the upgrade of the credit rating is certainly good, or at least better than having it stay one notch lower. But this is hardly cause for celebration. If anything, I think it highlights the long-term continued problems of the current administration (elected and appointed) within Harrison.

The problem with this article is a lack of context for the average person who is not familiar with credit ratings. First, lending to Harrison is still a “speculative grade” investment. That is, a Harrison bond would commonly be referred to as a “junk bond” (anything non-investment grade is called a “junk bond”). Second, it concerns me that the outlook is not positive (it is currently “stable”). Along with the ratings, the ratings companies also provide future outlooks/expectations (positive, stable, negative). If things were going “in the right direction” at a bare minimum at least the outlook would be positive. Even if that were the case, it wouldn’t excuse the current administration for getting the town in this situation. The analyst at Moody’s believes Harrison will remain a speculative investment for the near future. Third, to put this in context, both Italy and Spain have better credit ratings than does Harrison (you may note that they are both in the news at present specifically because of their ability to borrow money and rising interest rates; admittedly, Greece does have a lower rating).

I am not anti-development. I am in favor of the Red Bull Arena and other development programs in Harrison. What I am against is the management of these developments. The Redevelopment Board clearly did not handle the Red Bull Arena well, the evidence for this statement is the fact the town isn’t collecting taxes from the site. That is by far the largest issue holding down our credit ratings and the largest negative issue confronting this town’s economic future. Does the Redevelopment Board have the educational and experiential background to meet the challenges of negotiating with the developers? Personally, I don’t think so.

More importantly, the administration of this town continues to behave as though it were the 1960s and 70s: the town can be a cesspool of nepotism, with inefficient and too numerous public employees needlessly draining tax dollars away and the town continuing to run a structural deficit (spending more than we take in). The administration hasn’t reformed itself to face the new economic realities.

The town should be functioning in crisis mode right now: every effort made to cut spending and correct the currently structurally unbalanced financial operations (that is, “balance the budget”). Anything not absolutely essential should be cut. Most importantly, it means cutting workers, outsourcing positions, and finding ways to share services with neighboring towns (or merging). By far the largest expenses are salaries, health care costs, and pensions. We must reduce these costs. Government workers provide absolutely critical services and for the most part are great people doing good jobs. That said, Harrison is run inefficiently. Secretarial positions can be run more cheaply by an agency, fire and police can be shared with E. Newark and Kearny, more services (e.g. garbage collection) can be done regionally, etc. etc.

The arguments the administration folks will use to say they are the best people to run the town as is are:

1) Only the people currently in charge can fix the problems the town has, because these individuals have unique knowledge and experience that makes them the experts on the town’s dynamics. That’s the, “we’ve broken the town, we alone know how to fix it / we’ve buried the bodies, so we know where they are” answer. It’s ridiculous. Let’s not be insane and support the same people that continue to ruin the town. We should start by demanding a change to the town system, so we can have a competent administrator run the town full time.

2) The town can’t cut spending anywhere, because it will further deteriorate the town and lower the tax base, creating a downward spiral. This is absurd. They can run the town more efficiently, not simply cut good programs that prop up property taxes. Wasteful spending that doesn’t contribute to the long-term growth should be eliminated and long-term solutions (such as service sharing with neighboring towns, or even possible municipal mergers) should be explored. Town money should go to long-term capital improvements, not wasteful programs today and salaries/benefits for redundant municipal workers. Property taxes are partly depressed because the town is run inefficiently and with a structural deficit.

Bottom line: Yes, it is good news that Harrison’s credit rating is one notch higher. However, Harrison is still a speculative, “junk”, investment, worse even than Italy or Spain, and expected to continue to be in the near future. Why? Mismanagement by the Redevelopment Board over the Red Bull Arena and continued structural problems in the running of our municipal budget. There is an inability or simply lack of interest in efficiently managing the government and making the necessary structural changes in consideration of the current economic realities. After all, the people that run the town gain most from their current salaries and in no way stand to gain by managing the town more effectively because then they wouldn’t be in their positions.

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