Village of Ridgewood Maintains AAA Bond Rating

the staff of the Ridgewood blog

Ridgewood NJ, on Friday, S&P Global Ratings maintained an “AAA Stable” financial outlook for the Village of Ridgewood.

S&P Global said , “Ridgewood will likely continue to produce balanced operating results as it budgets conservatively while leveraging an affluent tax base.”

Village Manager Kieth Kazmark in a Facebook post said he was proud and Deputy Mayor Pamela Perron, “We work hard for this!”

Municipal bond ratings are assessments provided by credit rating agencies to gauge the creditworthiness and risk associated with bonds issued by municipalities, such as cities, counties, states, and other local government entities. These ratings help investors, both individual and institutional, make informed decisions about the level of risk they are willing to accept when investing in municipal bonds.

Here are the key components of municipal bond ratings:

1. Credit Rating Agencies: Several credit rating agencies, such as Moody’s Investors Service, Standard & Poor’s (S&P), and Fitch Ratings, assess and assign ratings to municipal bonds. These agencies use their own methodologies to evaluate the financial health and creditworthiness of the issuing municipality.
2. Credit Ratings: Municipal bond ratings are typically expressed as letter grades, similar to grades in school. The highest ratings indicate a lower risk of default, while lower ratings suggest a higher risk. The exact rating scales may vary slightly between agencies, but generally, the ratings can be categorized as follows:
   • Investment Grade:
     • Moody’s: Aaa, Aa, A, Baa
     • S&P: AAA, AA, A, BBB
     • Fitch: AAA, AA, A, BBB
   • Non-Investment Grade (High Yield or Junk Bonds):
     • Moody’s: Ba, B, Caa, Ca, C
     • S&P: BB, B, CCC, CC, C
     • Fitch: BB, B, CCC, CC, C
3. Factors Considered in Ratings:
   • Financial Health: The financial stability of the municipality, including its budgetary practices, revenue sources, and expenditure management.
   • Economic Conditions: The economic strength of the region, employment rates, and economic diversification.
   • Debt Levels: The amount of outstanding debt and the municipality’s ability to manage and service that debt.
   • Management Practices: The effectiveness and transparency of the local government’s management.
4. Impact on Bond Prices: The rating assigned to a municipal bond influences its market price. Higher-rated bonds generally have lower yields because they are considered safer investments. Lower-rated bonds carry higher yields to compensate investors for the increased risk.
5. Credit Watch and Outlook: In addition to the assigned rating, agencies may provide credit watches or outlooks. A negative credit watch or outlook suggests that there are concerns about a potential downgrade, while a positive outlook may indicate a potential upgrade.

Investors should carefully consider the credit ratings along with their own risk tolerance and investment goals before investing in municipal bonds. Keep in mind that while ratings provide valuable information, they are not infallible, and economic conditions or changes in a municipality’s financial health can impact bond performance.

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