Moody’s Investors Service recently cited several New Jersey municipalities for putting themselves in positions of risk by taking on or guaranteeing some of the debt burden incurred by private developers and other entities . New Jersey League of Municipalities Executive Director Bill Dressel said while he takes Moody’s comments seriously, he believes service agreement guarantees, which are common, can be in the best interest of taxpayers. He spoke with NJ Today Managing Editor Mike Schneider about the agreements.
Dressel said virtually every water, sewer and parking authority in the state has service agreement guarantees. “I think that they identified four communities, but like I say there’s many, many more and it’s an economic development tool,” he said. “These are dire financial times for communities and they have to do all they can to make sure they’re doing what’s in the best interest of their municipality and by having a service agreement guarantee.”
He said those involved in the agreement need to do their due diligence to ensure the funds to pay for it exist. He also said municipalities that take on debt are subject to review from the Division of Local Government Services, so there is some state oversight.
Dressel said he wasn’t able to comment on specific instances since he hasn’t spoken to mayors or financial advisors involved in the agreements, but he said the practice is widespread and not necessarily negative.
“Many, many municipalities across this state have, are and will be using service agreement guarantees as a way of growing their communities, being able to redevelop and provide quality of life services that would not otherwise be done,” he said. “When this is called and whether or not the town is going to be in a position to make those payments is something that has to be decided locally but we firmly believe that the concept is a sound one and we think you’ve got to look at the details of each individual agreement before you draw the assumption that the service agreements are not in the best interests of the citizens because I would argue that they are.”