Six New Jersey local governments, the most from any state, are among a list of 25 municipal-debt issuers with speculative ratings compiled by Moody’s Investment Service.
The issuers carried a combined $413.3 million in debt in fiscal 2009, the report said. That represents about 4 percent of the less than $10 billion owed in aggregate. Four-fifths of the total was owed by the Philadelphia School District; Jefferson County, Alabama; Detroit; and Detroit’s public schools.
Moody’s rates about 14,000 municipal credits, according to David Jacobson, a company spokesman. The list of 25 was derived from 7,800 general-obligation bond issuers, he said. Speculative-grade debt, or junk bonds, are rated Ba1 and below.
“A common story in this group is that issuers have trouble balancing budgets either because of a weak tax base, a sharp decline in a crucial revenue source, significant cost overruns for a large enterprise or an unwillingness or inability to cut expenditures or raise revenues,” wrote Dan Seymour, the study’s author.
Three of the New Jersey towns -- Collingswood, Harrison and Salem -- had their debt ratings lowered because they had guaranteed bonds based on development that fell short of projected revenue. The other three municipalities are Irvington and Weehawken, plus Camden, whose downgrade in November 1998 makes it the longest-appearing entity on the Moody’s list.
Michigan and New York each has four governments or school districts on the chart.
Last week Jefferson County commissioners reached agreement with holders of $3.14 billion of its debt to avert what would have been the biggest municipal bankruptcy.
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