Fitch Rates Plainfield, New Jersey's $12.6MM 2006 BANs 'F1'.
The rating reflects Plainfield's demonstrated market access and short maturity of the notes as well as long term credit characteristics including willingness to raise recurring revenues, improving financial position, and manageable capital needs. These positive credit attributes are offset by the city's stagnant economy, low wealth levels, and above average overall debt burden. Furthermore, the city expects notable expenditure pressure in the future from the rising healthcare, pension, and public safety costs, though it has enhanced its financial reserves in recent years and has demonstrated willingness to boost its tax levy to cope with expected pressures.
Located in Union County, NJ, Plainfield is about 24 miles southwest of New York City and 18 miles west of Newark, NJ. Plainfield is a largely residential suburb whose limited economy has historically been focused around manufacturing but is slowly diversifying. The employment base is anchored by Muhlenberg Regional Medical Center, a significant regional healthcare facility. Unemployment rates (6.6% in 2005) are notably higher than the state (4.4%) and nation (5.1%) following historical trend. The tax base has been flat as is evidenced by the -.1% average annual change in taxable assessed value over the past five years. The city, though, has consistently raised its tax levy, by an average of 9.2% annual growth the past three years, to offset slow tax base growth and improve financial flexibility. The fiscal 2007 budget anticipates another hike in the levy of approximately 8.2%.
The city's financial position has historically been characterized by weak reserve levels and notable expenditure pressures. Over the past three years though, the city has built sufficient reserves, as a result of tax levy and interest income growth with unreserved fund balance in fiscal 2005 totaling about 5.2% of expenditures. This total exceeds the city's informal policy of maintaining a minimum fund balance of 1.5% of expenditures.
Based on unaudited fiscal 2006 results, the city expects to add a modest amount to general fund balance, though it has not ruled out future drawdowns to cope with uncertainty regarding future costs. Public safety is the city's largest expenditure, and future cost growth will be dictated by the contract negotiations underway with the city's police and fire unions, whose contracts expire at the end of Dec. 31, 2006. Other notable expenditure pressures are from rising healthcare and pension costs.
The city's debt burden on an overall basis, including overlapping debt of the Plainfield school district for which the city levies taxes; sewer authority; utility authority; and County of Union, is above average at over 5% of equalized value, or $2,464 per capita. The direct debt burden of the city is low at 1.31% of equalized value or $543 per capita, with about $25.9 million in outstanding obligations. Plainfield's capital needs are manageable, with roads and public safety accounting for nearly all of the city's $95 million 2006-2011 capital improvement plan (CIP), $88 million of which is planned to be funded by debt.
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|Date:||Sep 13, 2006|
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