>https://www.bloomberg.com/apps/news?pid=20601109&sid=apo6dN1UXF54&pos=11
Dec. 22 (Bloomberg) — Bond ratings of New Jersey towns and cities are being reduced faster than in any other state as property values slide 11 percent and Governor Jon Corzine lowers municipal aid to cope with a $1 billion budget deficit.
Moody’s Investors Service cut ratings on $592 million in general obligation debt issued by 14 municipalities since October, about four times the rate for neighboring New York, the second-most indebted state, according to data compiled by Bloomberg. New Jersey’s per-capita personal income of $51,358 last year was exceeded only by Connecticut, according to the U.S. Commerce Department’s Bureau of Economic Analysis.
With the U.S. jobless rate hovering around 10 percent and tax revenue dwindling, the downgrades in New Jersey, the most- densely populated state, may be the start of a national trend, according to Richard Ciccarone, chief research officer at McDonnell Investment Management in Oak Brook, Illinois. Nine of 10 finance officers polled by the National League of Cities in September said it would be difficult to meet their fiscal needs in 2010, the worst outlook in 24 years.
“In many of the large states, this is going to become the norm: California, New York, New Jersey and Illinois,” said Ciccarone, whose firm oversees $6.8 billion in municipal bonds, including New Jersey debt. “The stress levels have got to be very high right now for municipal fiscal officials.”
Strained Budgets
New Jersey’s downgrades reflect local budgets straining under a cap on property-tax increases and lowered state funding, according to Moody’s. The New York-based firm cited these factors, along with a drawdown of surplus cash, in cutting its rating Dec. 4 on $113 million in debt issued by Woodbridge Township, the state’s sixth-largest municipality. The grade was lowered one level to A1, the fifth-highest, from Aa3.
Moody’s also lowered its rating on $71.3 million in debt issued by Irvington, a suburb of Newark where a fifth of schoolchildren between five and 17 live in poverty and the unemployment rate is 1.4 percentage points above the state’s 9.7 percent rate.
The firm on Dec. 17 cut the debt rating to Ba1, one level below investment grade, from Baa3, and said it may lower it further, citing concerns over how the town will close a $12 million budget gap and make up for a $50 million, or 1.7 percent, decrease in its tax base over the past two years.
“This is a reality that cities are facing across the country,” said Irvington Mayor Wayne Smith, 52, a Democrat who serves as president of the state’s urban mayors association. He said the city plans to cut the deficit in half by furloughing about half of its 600 employees once a month until the end of the fiscal year and selling a shuttered hospital.
Highest Taxes
New Jersey’s average $7,045 property tax in 2008 was the nation’s highest and 25 percent above the 2004 average of $5,617, according to the state Department of Community Affairs.
The median sale price of an existing home dropped to $322,700 in the third quarter from $364,500 in the same period in 2008, according to data from the New Jersey Association of Realtors. The number of tax appeals by homeowners increased more than 50 percent this year to 17,704, from 11,677 in 2008, according to state data.
“New Jersey’s local governments are certainly under pressure right now,” said Elizabeth Bergman, the lead Moody’s analyst covering New Jersey’s municipalities. “They continue to have rising expenditures and falling revenue opportunities.”
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