Moody’s Investors Service is reviewing the credit ratings for six New Jersey cities including the capital, Trenton, for possible downgrade after losing aid in Governor Chris Christie $29.7 billion budget.
The notice came hours after the Democrat-led state Senate failed yesterday to override Christie’s veto of $139 million in so-called transitional aid to some of the poorest cities.
Moody’s, in a report, said it placed Camden, East Orange, Passaic, Paterson, Trenton and Union City on a watch list and expected to finish its review within 90 days, a window during which the Legislature “may restore all or some of this aid.”
The company report called the aid loss a “credit negative” to those municipalities plus Bridgeton City, Harrison, Irvington and Prospect Park. “Credit negative” indicates Moody’s is more inclined to cut ratings.
The review of the six cities will involve a study of any plans to offset the loss of aid, which Christie cut to $10 million from $149 million for the fiscal year that began July 1.
“Given the magnitude of the adopted state-aid reductions and required process for implementing workforce reductions, we believe that city managers may be challenged to achieve the necessary savings quickly to prevent further financial decline,” according to the report.
Christie, 48, a first-term Republican, chopped almost $1 billion in budget items added by Democratic lawmakers, saying the state couldn’t afford the expenditures.
For Camden, with a Ba2 rating from Moody’s, or two steps below investment grade, transition aid of $69 million last year amounted to 38 percent of its spending plan. Paterson, with a Baa1 rating, or third-lowest investment grade, received $22.3 million last year, for 7 percent of its budget.
In May 2010, Moody’s lowered Trenton to A3, the fourth- lowest investment grade, after a previous Christie cut in aid. Communities in New Jersey, the second-wealthiest U.S. state, led the country in downgrades last year.
Kevin Roberts, a spokesman for Christie, declined to comment. Andy Pratt, a spokesman for Treasurer Andrew P. Sidamon-Eristoff, didn’t respond to an e-mail. Mark Albiez, chief of staff to Union City Mayor Brian Stack, who also is a Democratic state senator, didn’t return telephone calls. David Rousseau, a financial consultant to Trenton, didn’t respond to an e-mail.
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