News Column

Moody's likes arbitration cap

June 28, 2014

By Bob Jordan, Asbury Park Press, N.J.



June 28--TRENTON _ The interest rates that New Jersey taxpayers pay when the state borrows money may get cheaper.

New Jersey's long streak of scoldings from Wall Street for shaky finances changed course when Moody's Investor Service said Gov. Chris Christie's reauthorization of a 2 percent cap on base salary police and fire arbitration awards is "credit positive" for local governments.

Moody's said its declaration does not connote a rating or outlook change but is a sign of approval on one of many credit factors.

In May, Moody's and two other major credit rating agencies lowered New Jersey's bond rating from AA to A-status, joining Illinois and California in the bottom tier of the 50 states.

Bond ratings matter because they're used by investment banking firms to determine how high an interest rate the state will have to pay investors on new and refinanced bonds. The state is carrying $41.4 billion in debt.

The arbitration cap had expired on April 1. Moody's said continuation of the cap "will provide political support and increased certainty to local officials negotiating with union bargaining units, creating a greater likelihood that salary increases do not crowd out other municipal spending.""

Belmar Mayor Matt Doherty, a Democrat who attended the Republican governor's bill-signing in Trenton on Tuesday, said the cap was a factor when his town agreed in December to a four-year contract with 1.5-percent annual raises for police.

"We saved a lot of money on attorneys because there was a backstop. If there's a backstop, you can have a better negotiation. This has made the playing field a lot more even between management and labor. I can't tell you how much mayors value our public safety employees. All of them are underpaid and overworked. But at some point, there's only so much money and resources available," Doherty said.

Assemblyman Declan O'Scanlon, R-Monmouth, said the Moody's assessment "confirms the important role interest arbitration reform plays in helping local officials balance their budgets."

"The law gives officials predictability in prioritizing their programs when preparing their spending plans. Salaries account for a major portion of a town's budget and interest arbitration is a valuable tool in managing costs which benefits property taxpayers," O'Scanlon said.

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Bob Jordan: bjordan@app.com

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(c)2014 Asbury Park Press (Neptune, N.J.)

Visit the Asbury Park Press (Neptune, N.J.) at www.app.com

Distributed by MCT Information Services


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Source: Asbury Park Press (NJ)


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