N.J. Shore Pays Most Since 2011 Awaiting Sandy Aid: Muni CreditElise Young and Michelle Kaske
Seven months after President Barack Obama approved $50.5 billion of aid to help rebuild communities devastated by Hurricane Sandy, the New Jersey beach town of Manasquan has received about one-tenth of its cleanup costs.
It’s the same story up and down the 130-mile length of the Jersey Shore, where localities have almost doubled their borrowing, partly to pay for repairs until federal funds arrive.
Since Sandy struck Oct. 29, 42 Shore towns including Manasquan, where the $664,000 median value of owner-occupied housing is almost twice the state average, have sold about $398 million of short-term debt, data compiled by Bloomberg show. For a similar period in 2011-2012, 31 such communities issued $225 million. They’re borrowing as one-year interest rates are close to the highest since 2011.
“We desperately need to be reimbursed,” Donna M. Phelps, an assistant to the borough administrator, wrote in an Aug. 14 letter to the Federal Emergency Management Agency. The next day, Manasquan sold $3.44 million of notes due in 2014.
Towns along the coast, the backbone to New Jersey’s $40-billion-a-year tourism industry, expected hardship after Sandy, the biggest Atlantic storm in history. What some didn’t anticipate was a federal paperwork review so lengthy that they are borrowing even as FEMA has set aside $813.3 million for New Jersey and its local governments.
“You read in the newspaper about some towns getting their money and you say: Wait -- where’s ours?” said Joseph DeIorio, administrator and chief financial officer of Manasquan, with 5,900 residents about 60 miles (97 kilometers) south of New York. “We’re getting really antsy.”
Sandy killed more than 100 people in the U.S. and caused about $60 billion of damages in New Jersey, New York and Connecticut. In New Jersey, it harmed or destroyed 346,000 homes, mostly on the coast. Governor Chris Christie projects it will cost $36.9 billion to repair and prevent future damage.
Seven weeks after Sandy, Moody’s Investors Service gave negative credit outlooks to four beach towns -- Belmar, Lavallette, Long Beach Township and Sea Bright -- and cut Seaside Heights to A3, its fourth-lowest investment grade. The towns faced the loss of taxes from destroyed property, a reliance on short-term borrowing and uncertain levels of federal aid, a Moody’s report said.
In June, FEMA agreed to raise the reimbursement of repair costs to 90 percent from 75 percent. The agency has approved just over half of New Jersey’s local-government claims for such costs as personnel, debris removal and repairs, according to Darrell Habisch, a FEMA spokesman. It had processed 4,692 project worksheets and had another 3,961 pending as of Aug. 19.
Reimbursement depends on the complexity of the project and how quickly applicants provide documents to support the claims, Habisch said in an e-mail. Each project involves a team of five or six people who review bid comparisons, permits, contracts and time sheets for anyone, including volunteers, involved in the response and recovery, he said.
Long Beach Township, 25 miles north of Atlantic City, had received $850,000 from FEMA as of Aug. 21, about 9 percent of its costs, according to Mayor Joseph Mancini, a Republican.
“It’s a joke,” he said in an interview at Township Hall on Aug. 8. “Allegedly the money is sitting somewhere, but FEMA -- every day there’s somebody new coming into your office and I ask the same question: ’Are you the one with the checkbook?’”
Long Beach is the largest town on an 18-mile stretch of shore communities called Long Beach Island that swells with summer tourists. Moody’s cited the municipality’s widespread Sandy damage and the loss of taxable property in a December report that assigned a negative outlook to $2.2 million of general-obligation debt rated Aa2, the third-highest step.
On March 19, Long Beach sold $7.6 million of unlimited general-obligation notes maturing in one year at a yield of 0.5 percent, 0.22 percentage point above an index of benchmark munis, data compiled by Bloomberg show. That spread was unchanged from when the township sold $6.6 million of one-year notes in March 2012.
Long Beach, with 3,000 year-round residents and a $23.7 million annual budget, plans to borrow as much as $10 million more. It also intends to bill FEMA $13 million for repairs to parks, sewage pumping stations and other infrastructure.
“It’s an absolute disgrace -- disgrace -- that we’re going to have to go out and bond nine months after the money’s been appropriated by Congress,” Mancini said. “We can’t self-fund anymore. Our pockets aren’t that deep.”
New Jersey localities are financing storm upgrades as debt sold by the state and its municipalities is losing about 5 percent this year through Aug. 23, matching declines in the broader $3.7 trillion municipal market, Barclays Plc data show.
The municipalities have the advantage of selling into the best-performing segment of local bonds. Amid bets that a growing economy will lead the Federal Reserve to reduce its bond buying, short-term munis have earned 0.4 percent this year, while longer maturities have lost at least 0.7 percent, according to Standard & Poor’s data.
Christie, 50, a Republican who is seeking re-election in November and may run for president in 2016, has staked his political career on rebuilding. He has drawn criticism from some national Republicans for praising Obama’s response to Sandy and scolding party members in Congress for aid delays.
The governor told reporters in Camden on Aug. 21 that the reimbursements will help towns avoid raising property taxes to fund the repairs. FEMA is to blame for some delays, as are towns that didn’t conform to federal requirements or submitted incorrect documents, he said.
“Where it’s FEMA, we’re all over them, believe me,” Christie said. “I’ve learned a new F word, it’s FEMA. I knew the old one as some of you may know.”
Manasquan, in its Aug. 14 letter to FEMA, said it had received $401,000 of reimbursements. The borough, with an annual budget of $10.2 million, has spent $4.4 million on debris removal, according to DeIorio.
On Aug. 15, Manasquan sold unlimited general-obligation notes at a yield of 0.92 percent, or 0.58 percentage point above an index of benchmark munis, Bloomberg data show. That difference is almost half the 1.14 percentage-point spread when the borough sold one-year notes in January 2010.
Christie was 5 miles north of Manasquan on May 23 to reopen Belmar’s boardwalk. FEMA paid $9.2 million for the reconstruction. Belmar also was counting on the agency to replace as many as four oceanside pavilions, “part of the character of the Jersey Shore,” Mayor Matt Doherty said.
The agency now considers such a project too vulnerable to storms, said Doherty, a Democrat. Next month, the borough council will vote on a $6.6 million bond issue to build larger, multistory pavilions with a banquet hall and other concessions. About 500 residents have petitioned against the project, saying the plans and the borrowing should go up for public vote.
Moody’s in December assigned a negative outlook to $9.4 million of Belmar debt rated Aa3, fourth-highest. The borough since has issued $26.2 million in notes.
“We have no idea how much money we’re going to get from FEMA,” David Schneck, a 56-year-old Belmar resident who was an unsuccessful Libertarian Party candidate for the state assembly in 2011, said by phone Aug. 7. He signed the petition, he said, and urged the borough to be mindful of its credit rating.
“We should take a deep breath and wait to see how the dust settles,” he said. “These pavilions are not essential.”
In the market for new issues, California is set to offer $764 million of general obligations today. It joins New York City Housing Development Corp., which plans to sell $654.8 million of revenue bonds this week, in leading $6.2 billion of long-term debt sales, data compiled by Bloomberg show.
At 3.11 percent, yields on benchmark 10-year muni bonds are the highest since April 2011, and compare with about 2.8 percent for similar-maturity Treasuries.
The ratio of the yields is about 110 percent, above the five-year average of 101 percent. The higher the figure, the cheaper municipal securities are relative to Treasuries.
Following is a pending sale:
Texas plans to offer $7.2 billion in tax- and revenue-anticipation notes as early as today to help manage its cash flow in the fiscal year starting Sept. 1. The notes mature in August 2014 and are rated SP-1+ by S&P, its highest short-term credit grade.