Wallington Borough, NJ GO Debt Downgraded To 'AA-' From 'AA' On Reduced Reserve Position; Outlook Stable

WASHINGTON D.C. (S&P Global Ratings) Jan. 29, 2019--S&P Global Ratings lowered 
its rating on Wallington Borough, N.J.'s general obligation (GO) bonds 
outstanding one notch to 'AA-' from 'AA'. The outlook is stable. 

"We base the downgrade on the borough's reduced reserve position over the past 
two fiscal years, combined with declining income indicators, as well as some 
concern regarding the potential for increased fixed charges in future years 
relating primarily to the state's underfunded pension plans in which the 
borough participates," said S&P Global Ratings credit analyst Timothy Barrett.

"Specifically, despite some of the reduction in reserves resulting from 
deferred charges and increased reserves for delinquent property taxes, the 
borough's weakened budgetary flexibility is well below that of similarly rated 
peers, as are the borough's current income indicators," Mr. Barrett added.  
Despite these pressures, the borough's strong overall economic factors in 
addition to very strong liquidity levels continue to support the rating. 

Wallington Borough's GO bonds are secured by the borough's unlimited full 
faith and credit pledge.

The rating reflects our opinion of Wallington's:
  • Strong economy;
  • Adequate management, with standard financial policies and practices under our Financial Management Assessment methodology;
  • Weak budgetary performance;
  • Very strong liquidity;
  • Adequate debt and contingent liability profile; and
  • Strong institutional framework score.
The stable outlook reflects our opinion of Wallington Borough's strong 
economy, bolstered by the borough's access to the New York City metropolitan 
statistical area and adequate budgetary flexibility despite some weakening of 
reserves in recent years. Further supporting the rating is the borough's very 
strong liquidity. We believe management will make the necessary budget 
adjustments in order to align current fund expenses with revenues and maintain 
a structurally balanced budget. As a result, we do not expect to change the 
rating over our two-year outlook horizon.

If reserves decline such that budgetary flexibility worsens to a level no 
longer commensurate with similarly rated peers, or if increases in the 
borough's fixed costs, for example due to increases in pension expenses, 
pressuring financial performance, we could we could lower the rating. 

Should the borough restore balanced financial operations and increase reserves 
to levels more commensurate with higher rated peers while maintaining very 
strong liquidity, we could raise the rating. 
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