Moody’s lauds financial impacts of consolidation

Moody’s published its positive review of the municipal merger in its weekly outlook of credit predictions last Monday, according to The Star-Ledger.

Princeton Borough has been an independent municipality surrounded on all sides by Princeton Township since 1894. On Nov. 8, residents in both the Borough and the Township passed a referendum to consolidate the two municipalities beginning in 2013.

Moody’s looked positively on the consolidation decision as a wise strategy to reduce redunancies and save on municipal costs.

“The merger reflects the increasingly creative ways that local governments throughout the nation are dealing with ongoing budgetary stress. We expect more localities to explore mergers as a cost-saving option,” Moody’s financial analyst Vito L. Galluccio wrote.

Gov. Chris Christie’s administration has also been very supportive of the merger as a move he hopes to see repeated in smaller municipalities throughout the state. New Jersey is made of 566 independent municipalities, and the state’s Department of Community Affairs is encouraging municipalities to consider mergers as a cost-saving measure.

In September, Christie’s office announced that the DCA would give state aid to cover 20 percent of the transition costs for consolidating communities and that it would allow municipalities to spread their transition costs over a greater period of time by selling bonds to cover the initial costs and then paying them back over a five-year period.

The new municipality will have a debt of $112 million, about 16 percent of combined operating expenses for the current Borough and Township.

Moody’s noted that in other municipal mergers, the combined municipality had a higher credit rating than either of its forebears.