Jersey Shore towns have borrowed $398M since Sandy, awaiting federal aid

Aug. 28, 2013

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...

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...

Long Beach Township is the largest town on the 18-mile stretch of Long Beach Island, which 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...

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...

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.

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