Standard and Poors Global Ratings (“S&P”) has recently increased Ventnor City’s bond rating from AA- to AA. The increase in rating comes from S&P’s recent review of the City’s current financial information and economy.
S&P notes strong economy, strong management, strong budgetary performance, very strong budgetary flexibility, very strong liquidity, adequate debt and contingent liability profile in their rating review of the City.
The rating action primarily reflects our view of management's enhanced financial planning and forecasting that have led to improved budgetary balance and healthier reserves, which provide greater cushion to absorb unexpected costs, particularly relative to environmental risks associated with the city's coastal location.
We consider Ventnor City's economy strong. The city, with an estimated population of 9,750, is located in Atlantic County. The city has a projected per capita effective buying income of 112% of the national level and per capital market value of $208,326. Overall, the city's market value fell by 6.6% to $2 billion in 2018. The county unemployment rate was 5.9%
Located on the 8.1-mile-long Absecon Island, Ventnor is a seaside community southwest of Atlantic City and 57 miles from Philadelphia. Primarily residential, the city's tax base has grown as older homes are redeveloped and renovated, increasing the ratable base. Although some softening occurred following the contraction of the casino industry in Atlantic City, the revaluation implemented for 2017 stemmed tax appeals and stabilized the tax base. In addition, new restaurants opened within Ventnor with the allocation of two of its three liquor license permits. A third license remains, and will likely lead to another establishment over the next 12 to 18 months.
The AA rating reflects S&P’s view of enhanced financial planning and forecasting that has led the City to improved budgetary balance, healthier reserves, and greater cushion to absorb unexpected costs.
S&P noted when this administration took office in 2016, it was after the adoption of the fiscal 2016 budget and following a period in which the city's fund balance appropriation was not fully regenerated, leading to a mismatch between revenue and appropriations.
A more conservative approach to budgeting and improved financial forecasting resulted in fiscal years 2017 and 2018 ending in favorable results and improved budgetary performance. Also noted was the settling of the City’s public safety contracts through Dec. 31, 2020 and reducing accumulated absence payouts, increasing salary steps, and requiring the highest level of employee contributions towards health care coverage allowed under state statute.
Since the current administration took office, the City’s fund balance grew more than 50%, providing flexibility to absorb unanticipated expenditures, noted S&P. It was further noted that the City has very strong liquidity and that 74.3% of the City’s current debt is scheduled to be retired over the next ten years.
S&P noted the City’s approach to ensuring its tax base and infrastructure is protected against environmental risks will help maintain the City’s strong economy when coupled with development underway. The City’s resiliency efforts, including its leadership role in developing a unified, regional resiliency master plan for Atlantic County, was highlighted. Also mentioned were the security measures put in place to protect the City from cyberattacks.
Our view of the City’s financial management improved to good from adequate given management’s undertaking of resiliency efforts to protect the community from severe weather events as well as its approach to hardening its computer systems and infrastructure from cybersecurity attacks. In addition, the City is required by state statute to produce a six-year capital plan along with its operating budget, but we believe longer-term projections of debt service expenditures that accompany the plan enhance our view of the City’s capital planning.
S&P noted longer term projections of debt service expenditures as a positive. They also noted Ventnor’s budgetary performance is strong and its total tax collections have improved.
S&P has assigned a stable outlook with the rating, reflecting their view that the City’s enhanced forecasting and financial planning indicates this management teams’ commitment to ensuring the City’s strong financial performance over the long term.
A bond rating is a rating that independent agencies issue to measure the credit quality of a particular bond. The bond rating measures the financial strength of the issuer of the bond, in this case the City of Ventnor, and its ability to make interest payments and repay the principal of the bond, when due. Standard & Poor's, Moody's, and Fitch Ratings are the major bond-rating agencies. Bond ratings are vital for informing investors of the quality and stability of the bond and the municipality, and affect interest rates that a municipality will pay. Higher rated bonds are viewed as a safer and more stable investment.
Standard and Poor’s defines an AA rating as follows: An obligation rated 'AA' differs from the highest-rated obligations only to a small degree. The obligor's capacity to meet its financial commitments on the obligation is very strong.Community News