Fitch Rts Old Bridge, NJ GOs 'AA-'; Revises Outlook to Stable

Fitch Ratings-New York-November 25, 2003: Fitch Ratings assigns Old Bridge Township, NJ's $5 million general obligation (GO) bonds, series 2003A and $652,000 GO taxable refunding bonds, series 2003B 'AA-' and assigns a Stable Rating Outlook. Fitch also affirms the 'AA-' rating on the township's $33 million outstanding general obligations and revises the Rating Outlook to Stable from Negative.

The bonds are scheduled to sell competitively on Dec. 3. Series A proceeds will be used to pay outstanding BAN principal and finance general capital improvements. Series B proceeds will amortize costs associated with the township's early retirement incentive, as authorized by the state.

The 'AA-' rating reflects the township's strong financial management, moderate debt burden with manageable capital needs, rapid amortization of principal, strong tax collection rates and above average income levels. The revision of the Rating Outlook to Stable from Negative reflects strong unaudited results for 2003, showing a build-up of unreserved fund balances in the current fund, as well as a plan reflected in the proposed 2004 budget to further build reserves and decrease one-time revenue sources in order to reduce the level of prior-year surplus included in future budgets moving closer towards structural balance.

Located in Middlesex County, 30 miles south of New York City, Old Bridge encompasses 38.3 square miles. The township is 77% residential and approximately one-third built-out. With a population of 60,456 people in 2000, the township grew over 7% from 1990, just behind the state's 8.6% growth over the same period.

Income levels are above the county, state and nation and unemployment rates remained below the state and nation at 4.7% in September 2003. Although there are some employment opportunities in the township, lead by services, retail trade and manufacturing, the bulk of residents are employed in New York City and the surrounding suburbs. Assessed valuation has grown an average of 1.8% over the last seven years and the township is actively working to enhance its commercial sector through the acquisition of prime real estate on the major roadways surrounding the township.

Financial management is strong and fiscal 2003 unaudited results show significant improvement over budget projections with an estimated unreserved current fund balance of $8.6 million or a high 19.7% of spending. Despite an increase in deferred charges in 2003 due to police overtime pay, fiscal 2003 results represent a 27% increase over 2002 fund balance levels, versus the original projected drawdown to 2.7%.

The large difference in budget to actual results reflects the 19% property tax increase in 2003, the bulk of which was not received until the second half of fiscal 2003, the 99.5% tax collection rate, up from 99% in 2002 and flat state aid. While the 2004 budget waits approval later this month, the proposed budget prudently includes a 4% increase in property tax rates, which will likely not be necessary due to the expectation of extraordinary aid from the state this year.

While fiscal 2004 will present continued challenges in the area of cost containment and state funding, the township's demonstrated willingness to raise recurring revenues and commitment to conservative budgeting should help the township maintain the current level of financial flexibility over the longer term.

The township's debt position is quite favorable with a low direct debt burden and manageable capital infrastructure needs focused on open space land acquisition. Overall debt is $2,245 per capita and 3.3% of market value, including overlapping county debt. Although the debt service burden on the budget is above average at 13.7%, the township has a policy of rapid amortization with 95% of outstanding debt retired in 10 years.

Contact: Jessalynn Moro +1-212-908-0608, New York.