Hoboken Becomes A High Grade Credit Under Mayor Zimmer

 Just a few short years ago Hoboken’s credit rating was mired in junk status at Ba3 (Moody’s) and BB- (S&P equivalent). This was due to major financial improprieties that led to a state takeover of Hoboken’s finances. Unrelated to Hoboken was the outcry by many ill-informed investors who claimed that the rating system was flawed. In response the rating agencies upgraded every single credit one full grade to BAA3/ BBB- (equivalent) in Hoboken’s case. Market traders such as me saw through the misconception and trading levels remained unchanged despite the fake upgrade.

When Mayor Zimmer was running for office in 2009 I sat down with her to review Hoboken’s ratings which at that time related to the city guarantee of HUMC, now since privatized and saved by Mayor Zimmer. She assured me that it would be a priority to see Hoboken through to better days. One of the factors that I asked her was to maintain a 5-10% budget surplus because that would impress the rating agencies. She asked extremely knowledgeable and sound questions which reinforced my desire to support her.

The agencies are not fooled by a one or two time display of fiscal responsibility, but need a multiyear track record to rely on. It is important to note that the council minority led by Beth Mason and Tim Occhipinti sought to zero out the surplus at every opportunity. The Chicken Hawks could not come up with any substantial savings (unlike Mayor Zimmer who cut millions), so they took the fiscally irresponsible approach of wanting to deplete the surplus. Luckily for the Hoboken taxpayer the incompetent’s couldn’t add their numbers correctly and with the election of Jen Giattino fiscal sanity returned to the Mile Square city.

According to the new report Standard & Poor’s has recognized a “very strong economy” (unlike the rest of New Jersey), important “strong management”, a very “strong budget flexibility”, “very strong liquidity” (e.g. the surplus), “very strong debt and contingent liabilities profile” and “good financial management practices”.

The prior report highlighted “significant deferred charges, annual cash flow borrowing and a history of financial mismanagement”. As a result Hoboken is estimated to save$1 million in interest over 10 years when we refinance the Parking Utility debt.

Currently,  Hoboken is forced to float debt through Hudson County which although enjoying the same rating, is under  review with a negative outlook directly related to its contingent liability of guaranteeing local city’s (like Hoboken) debt. The County also permits only the issuance of one year notes (to limit their exposure) so towns like Hoboken have a serious problem of a risky debt/liability ratio. The vast majority of our debt is short term so if interest rates spike, the taxpayers would get screwed.

As Council President Peter Cunningham said “Mayor Zimmer and I have prioritized the issue of fiscal responsibility since 2007, it is and will continue to be a priority as it is fundamental to everything we do from infrastructure improvements to future development to ensuring Hoboken is financially protected from the unexpected”.

Mayor Zimmer and Reform majority should be commended for this significant event as Hoboken can now independently issue its own debt and even more important structure it properly as well.