Moody's Investors Service said it has downgraded to Baa1 from A2 the rating on the Borough of East Rutherford, N.J.'s approximately $17 million in outstanding rated debt secured by the borough's general obligation, unlimited tax pledge.
Moody's maintains the GO rating under review for possible further downgrade.
Ongoing delays in the borough's adoption of a fiscal 2012 budget (year-end December 31) have put East Rutherford's finances in a precarious position that relies on market access for cash flow financing.
The downgrade to Baa1 reflects the borough's poor budget management practices, our expectation for additional delays in future year budget adoptions and continued strain on the borough's financial position with the likelihood for a deeper negative cash position at year-end 2012.
The review for further downgrade will focus on the borough's liquidity position, net of outstanding tax anticipation notes.
The review will also consider the potential positive results from a possible favorable settlement with the New Jersey Sports and Exposition authority regarding unpaid taxes on the Timex Performance Center, the training facility for the New York Giants.
