Moody's Investors Service upgraded Jersey City, N.J. to A1 from A2, citing rising residential income levels, healthier government balance sheets and improved structural balance.
Moody's has a stable outlook on the new rating. The upgrade affects $833 million in city and city-guaranteed general obligation bonds.
Whereas in the fiscal 2010 budget the city had a structural deficit that was 10.5%, in the fiscal 2014 budget the city is believed to have had a more manageable 3%, said Moody's analyst Josellyn Yousef.
After Yousef included reserves and accounts receivables to make the city's fund balance more comparable to Generally Accepted Accounting Standards, the adjusted fund balance improved to 14.3% in 2013 from 5.4% in 2010.
Whereas the city's median family income was 64% of the United States median family income in 2000, it had grown to 98.4% of the U.S. median in 2012.
Jersey City has been benefiting from its close proximity to New York City. It has two of the first stops in New Jersey on the PATH subway system from New York City.
Jersey City is New Jersey's second most populous city, following Newark. However, it is the city with the greatest equalized value, which is defined as the full market value of all property in the tax base.
"The city has encouraged commercial and residential development through payments in lieu of taxes agreements," Yousef said. The city has had success in attracting major residential and other development.
PILOT revenues have doubled in the last 10 years. They are growing and are expected to continue to grow rapidly, Yousef said.
As negatives for the city, Yousef noted that the city's direct debt burden (2.8% of equalized value) is high. She also said the city faced increasing other postemployment benefit and short-term debt service costs. Finally, the city uses a poor financial practice of relying heavily on deferred charges.
