Noting the City's financial flexibility and low debt levels, international credit rating agency Fitch Ratings Inc. reaffirmed Newark's AA+ outlook, which the City has held since 2010. This is among the highest ratings offered by the agency. Key rating drivers include the City's revenue and expenditure framework, long-term liability burden and operating performance, which collectively indicate a stable financial outlook.
"Being good financial stewards is not only a critical component of our mission to ensure customer service excellence, but it also allows us to operate a more effective local government," said city manager Carol Houck. "By reaffirming our AA+ rating, Newark is able to secure lower interest rates for funds we borrow, which, in turn, saves taxpayers money."
When evaluating the key rating drivers separately, Fitch Ratings highlighted Newark's history of funding capital needs on a pay-as-you-go basis, which helped maintain a low debt burden. The agency also noted Newark's ability to control its pension and other post-employment benefit liabilities when non-police personnel were moved to a defined contribution retirement plan.
"This particular stress-test conducted by Fitch Ratings, primarily reviewed the expenditure control measures taken by management over the past few years, along with City Council's willingness to address revenue needs when necessary," said director of finance David Del Grande. "Many hard decisions were made to minimize the impact of an economic downturn on the services provided by the City to its residents and business, and it was the sum of those actions that gave us the stable outlook."
Strong expenditure flexibility and substantial independent revenue-raising capacity enable Newark to demonstrate a superior degree of gap closing ability and financial resilience during an economic downturn, as noted in the report. It also indicated conservative budgeting resulted in a trend of general fund operating surpluses for the City, adding to reserves during times of economic recovery.
Fitch Ratings is considered one of the "Big Three" credit rating agencies, controlling 95% of the ratings business along with Moody's and S&P. A long-term rating of AAA is the highest rating description provided by Fitch, with AA+ falling just below the highest level. The higher the credit rating, the increased likelihood municipalities will meet its financial obligations. An AA+ rating makes bonds sold by the City of Newark desirable to investors when the need presents itself to utilize the bond market.