OREANDA-NEWS. Fitch Ratings has affirmed its 'A+' rating on the following outstanding general obligation (GO) bonds of the Borough of Collingswood, New Jersey (the borough):

--$1,430,000 GO refunding bonds, series 2014;
--$2,910,000 taxable GO bonds, series 2014.

The Rating Outlook is Stable.

SECURITY
The bonds are secured by the borough's full faith and credit and the levy of ad valorem taxes upon all taxable real property in the borough without limitation as to rate or amount.

KEY RATING DRIVERS
STABLE OPERATING PROFILE: Revenues are predominantly derived from a stable residential property tax base. While statutory limitations are in place on annual levy growth, the borough has implemented modest annual increases in revenues to support its conservative expenditure assumptions. Tax collections rates are very strong.

ADEQUATE RESERVE LEVELS: Reserves have grown in the past two years and currently are at the high end of the borough's policy requirement of 5% to 10% of spending. Projected surplus results for fiscal 2015 reflect additional growth in reserves.

SOUND ECONOMIC METRICS: The borough's economic base benefits from its convenient access to Philadelphia, an important regional economic center, albeit one with less than exceptional growth expectations. Borough income metrics are favorable to the region and area unemployment rates have improved.

HIGH DEBT BURDEN: Key debt metrics are considered high by Fitch. Carrying costs associated with debt service, pension, and other post-employment benefits (OPEB) are also somewhat elevated but partially as a result of rapid principal amortization of tax-supported debt (75% in 10 years).

RATING SENSITIVITIES
CHANGES IN FINANCIAL POSITION: An unforeseen reduction in reserves, in support of operating costs or for non-recurring measures, could pressure the rating. Maintenance of adequate reserves at current levels combined with a moderation of debt levels could result in a positive change in the rating.

CREDIT PROFILE
Collingswood Borough is located in Camden County in southern New Jersey, approximately seven miles east of Philadelphia and 35 miles southwest of Trenton. The borough has a population of 13,926.

MATURE RESIDENTIAL TAX BASE; AVERAGE INCOME METRICS

Collingswood Borough is a commuter community with a tax base nearly 90% comprised of residential/apartment properties. There are no dominant commercial/industrial taxpayers or employers within the borough.

The borough's 2015 assessed valuation of $1.06 billion is essentially unchanged from 2008. Residential values were up 2.8% year-over-year through January 2016 according to Zillow.com. The borough is fairly developed - less than 1% of its tax base is classified as vacant land.

Borough residents exhibit a high level of educational attainment and key income metrics that are equal to or exceed those of the county, the metropolitan statistical area (MSA), and the U.S. (but trail those of the fairly wealthy state).

PROXIMITY TO PHILADELPHIA VIEWED FAVORABLY

The borough's participation in the Philadelphia-Camden-Wilmington MSA helps offset risk typically associated with a small or limited economic base. Philadelphia remains an important center for healthcare and higher education, with good prospects for long-term economic stability. High speed commuter rail service is provided from Collingswood to the Philadelphia downtown area by the Port Authority Transit Corporation (PATCO). PATCO also provides connections to NJ Transit and Amtrak train service.

Preliminary December 2015 unemployment rates for the county (4.9%) and MSA (4.1%) have improved from 6.5% and 4.9%, respectively, in the prior December as both labor and jobs have experienced growth.

SURPLUS OPERATIONS IMPROVE FUND BALANCE POSITION

The borough adopted a reserve policy in 2012 that requires a fund balance in the current fund (or general fund) between 5% and 10% of the prior year's budgeted appropriations. As of Dec. 31, 2014, reserves totaled $1.9 million or a sound 10.6% of borough spending for operations. Modest property tax increases and conservative budgeting supported the surplus results for the past two years leading to growth in reserves. Property tax collection rates have been excellent, equal to 99.5% or better each of the last five years.

Unaudited results for 2015 depict a $538,000 surplus from operations, and an estimated year-end fund balance equal to $2.4 million or an estimated 13% of spending. The 2016 budget is still subject to approval and the proposed budget is similar to the prior year with modest tax revenue increases and a moderate water and sewer rate increase. Budgets are due to be filed with the county by March 31st each year.

REVENUE GROWTH SOMEWHAT CONTRAINED

There are potential challenges to revenue growth in the future as the borough is largely built out and revenue raising authority is constrained by New Jersey's 2% cap on growth in the property tax levy. However, certain exclusions apply to the tax cap law including an increase in the tax levy from new taxable value as a result of construction or additions; capital expenditure and debt service cost increases; and, increases in pension contributions and health care costs in excess of 2%. State law also restricts growth in municipal appropriations and increases in base salary awarded through arbitration that partially mitigate risk associated with constraints on the borough's revenue raising authority.

HIGH DEBT BURDEN

The borough's overall debt burden exclusive of self-supporting water and sewer debt is considered high by Fitch at 6.4% of market value or $4,880 per capita. These ratios include the borough's share of county and local school debt.

The borough had maintained an above-average amount of short-term indebtedness (initially $9.6 million) primarily in connection with the infrastructure improvements and a developer guaranty associated with the Lumberyard condominium project. The borough has successfully sold all 13 condos it had owned associated with the project. It used proceeds from the condo sales in addition to fixed rate debt to substantially reduce its related short-term debt. Management plans to use the remaining sale proceeds along with a small appropriation to extinguish an approximate $1 million of the $3.34 million of associated short term debt outstanding coming due in April. The balance is planned to be permanently financed as fixed rate debt.

MODERATELY HIGH CARRYING COSTS

Annual funding of debt service, actuarially-required pension contributions and OPEB on a pay-as-you-go basis represented a high 25% of the borough's allocable 2014 current fund spending. Debt service costs, net of $2.1 million attributed to the one-time pay-down of short-term notes, represented 15.4% of spending. The rapid principal amortization of general current fund debt (75% in 10 years) contributes to this higher annual spending.

All employees and retirees participate in the state administered Police and Firemen's Retirement System (PFRS) or the Public Employee's Retirement System (PERS). The funded status of the PFRS and PERS local portions was 76% and 74% respectively, as of June 30, 2014. Using a 7% investment rate of return, the funded levels decline to a Fitch-estimated 69% and 67%, respectively. Combined contributions paid by the borough in 2014 totaled $1.03 million.

The borough participates in the State Health Benefits Program for healthcare coverage for employees and retirees. Contributions for retirees paid in 2014 were $767,516, or a manageable 4.4% of spending.