The current chapter in Camden’s history really begins in 2002, when then-Gov. Jim McGreevey, a Democrat, signed the Municipal Rehabilitation and Economic Recovery Act. The law authorized the state takeover of Camden, via the Department of Community Affairs. One of the largest municipal takeovers in U.S. history, the move was prompted by decades of corruption and mismanagement by the city government.

Under the law, which Gov. Jon Corzine, also a Democrat, renewed in 2007, the state stripped Camden of authority over its own governance and finances. A state-appointed chief operating officer was put in place to oversee the city’s affairs.

As part of the takeover, the city received $175 million in aid from the New Jersey Economic Development Authority to help boost its redevelopment, for infrastructure work, schools and other projects. The money was steered toward several new “eds and meds” facilities such as the expansion of facilities at the Rutgers-Camden law school and Cooper Health System hospital, as well as the aquarium expansion (See Part 1, Feb. 24).

“It didn’t really have the bang that people thought it would, and when we realized that failed, the Legislature said ‘OK, let’s try this now’,” Marc Pfeiffer, assistant director of the Bloustein Local Government Research Center at Rutgers University, said of the EOA.

“You had some things, you had a number of things that were done. Some improvements, money that was spent, made some improvements at some facilities. But it didn’t have the big catalyzing effect that it was hoped it would have,” he added. “We chalked that up to a learning experience.”

The takeover ended under Corzine in early 2010 when he signed the “Camden Freedom Act.” At that point, though, the city still relied on state aid, the economy was struggling, the crime rate was high, many residents remained in poverty and school performance lagged. “It was a failure, it really was,” then-council president, now Mayor Frank Moran was quoted as saying in a January 2010 Philadelphia Inquirer story.

“It had some effect, it didn’t have enough,” Pfeiffer said. “It wasn’t for lack of attention. It’s just that those solutions were not the best solutions. The ideas didn’t work as people thought they would.”

Camden County Freeholder Jeff Nash suggested that the takeover was necessary at the time because state officials believed the administration was not doing what was necessary to help the city survive, but he acknowledged shortcomings in the approach.

“The money that McGreevey gave to the city was an extraordinary amount of money, but it wasn’t enough to make a meaningful difference in a city that had infrastructure problems, social issues that exceed the amount of money that the state was going to put in,” Nash said.

In the decade following the end of the state takeover, Camden and the Department of Community Affairs developed a more collaborative relationship, which state officials argue has been helping the city.

Credit due?

In fact, S&P Global Ratings in October 2019 reaffirmed the city’s credit rating at BBB+ and revised its outlook from stable to positive, citing in part “the city’s relationship with the state, including state support of the city’s financial operations and assistance in planning, providing stability.”

In a statement, Lt. Gov. Sheila Oliver, who also heads the DCA, said the change “reflects the immense progress we are making in Camden as a result of strong and steady oversight with a deep commitment to fiscal responsibility.”

Lawmakers tried in December to extend the current state oversight arrangement for another five years — a move championed by legislators representing South Jersey. But the bill, although it passed the Senate, fizzled in the Assembly.

Personnel problems persist. The city’s most recent state-appointed financial monitor, John Salvatore, stepped down on Nov. 25 following the revelation of several offensive posts he made on Twitter, according to a Dec. 10 report from the Courier-Post.

Camden’s bond rating — a key indicator of a public government’s finances – hit a low point when Moody’s issued a Ba2 rating in 2011, virtually junk status. But the score has steadily improved.

In 2014, S&P lifted Camden to the current BBB+ with a stable outlook, meaning the city reached an investment-grade status.

“In two short years, we were finally able to get our fiscal house in order,” Dana Redd, who served as Camden’s mayor from 2010 to 2018, told lawmakers in late September. “Then the ‘impossible’ happened – after 15 years of negative or junk bond status, Camden received its first investment grade rating.”

S&P cited the decision to eliminate the Camden police department and instead pay an annual fee to the Camden County Police Department to patrol Camden with a 400-officer force. Annual fees in 2014 were $62 million, S&P said.

The ratings agency described Camden’s economy in its 2014 report as “weak due to the city’s very low wealth and income, historically high crime, high poverty, and high unemployment.”

The report does note that unemployment has fallen from its historic high in 2011. “[City] management credits the improvement to economic investments, spurred, in part, by economic incentives provided by the New Jersey Economic Development Authority through the Economic Opportunity Act of 2013,” S&P said.

The report highlighted two projects: an $82 million tax break for the Philadelphia 76ers to move several of its practice and corporate facilities to Camden, and the construction of additional student housing for the Cooper Medical School at Rowan University.

The revised outlook from stable to positive suggests that Camden’s credit rating could be raised in the future. City officials attributed that improvement to the Grow NJ and Economic Redevelopment and Growth tax incentive programs. In fact, the new construction along the city’s waterfront is expected to boost the assessed property value, according to S&P.

In issuing the revised outlook, S&P analysts said they “view the city’s economic trajectory as improving, resulting in revenue growth over the past six years to cover increased expenses and potentially supplant some state aid should it decline.”

But the city could be vulnerable if the national economy slows down, the debt watcher noted.

“Should budgetary performance weaken and expenses outpace revenue growth, thereby eroding Camden City’s financial flexibility, we could revise the outlook,” S&P said.

Nonetheless, the improved outlook suggests a degree of optimism about the city’s progress.

“I think that is kind of a testament to certainly there being some positive momentum in some of the rating factors that we look at,” S&P Analyst Timothy Barret told NJBIZ. “Most notably probably the economic developments that have occurred and a lot of the waterfront development.”

“If you looked over the longer-term range of five years, we viewed finances as pretty steady,” he added.

Falling joblessness

Camden boosters point to the city’s unemployment rate, which has reached historic lows. Of course, the numbers nationally are also at record low levels amid a decade-long economic expansion.

Kris Kolluri, chief executive officer of the Cooper’s Ferry Partnership – a local community development organization — insisted that the job numbers are significant.

“For 50 years, the city of Camden has never gotten the benefit,” he said. “Anytime the country did well, economically, it somehow eluded Camden. When the country was going through periods of economic depression, we took it on the chin doubly.”

Nonetheless, state data show that the city’s unemployment rose and fell in lockstep with the state and county, though with a much larger gap in the rates between the city and the other two jurisdictions.

In January 1990, the national unemployment rate was 5.4 percent, according to the federal Bureau of Labor Statistics. At that time, the New Jersey unemployment rate was 4.5 percent, Camden County was at 6 percent and Camden City at 16.6 percent, according to the New Jersey Department of Labor and Workforce Development’s Office of Research and Information labor force estimates.

The latest data from the BLS show the national unemployment rate at 3.6 percent. The state Labor Department reported unemployment rate for New Jersey of 4.6 percent, the Camden County was 3.8 percent and the Camden City rate was 7.6 percent.

The October 2019 report indicated that much of the economic growth “has yet to translate into higher health and income indicators,” but that “new capital investment and improved safety record should support continued financial stability and potentially reduce Camden City’s reliance on state revenues.”

Camden’s credit rating could increase if the city maintains at least “stable” financial performance and demonstrates additional economic growth, S&P said.

S&P’s highest rating is AAA, followed by AA+, AA, AA- and so on down the line. Hundreds of local governments, ranging from counties to school boards, municipalities and public utility agencies, receive ratings for the bonds they issue.

In New Jersey just over 30 percent of rated towns get an AA rating, followed by just less than 30 percent with an AA- rating, 20 percent at AA+ rating and 10 percent got the top AAA rating.

Less than 1 percent of municipal governments in the state are rated at BBB+. Even fewer are at BBB and BB.

Camden’s 2018 fund balance for 2018 was $13 million – or 6.8 percent of its current expenses – while the 2019 fund balance is slated to be $10 million out of a $190 million budget, or 5.3 percent.

The S&P report uses the phrases “fund balance” and “surplus” somewhat interchangeably. A fund balance is the number left over once liabilities – amounts owed and spent – is subtracted from the total number of assets.

A negative fund balance means that the city owes and spends more than its current cash on hand, while a positive fund balance means the city has money left over after factoring everything it has to spend.

City officials have been targeting a surplus of 10 percent of their yearly expenses, according to S&P, which has not happened.

The surplus is slated to be $10 million again for 2020, according to the city’s budget documents.

“You’re not going to see a significant jump in revenue, but what we have planted today is going to bloom in the years to come,” Moran said in November.

As with much of what goes on in Camden, patience is required – especially when it comes to local sources of funding.

Next week: How Camden raises the money necessary to run the city.