Fitch Ratings last week revised its outlook on Jersey City to stable from positive due to high fixed costs, reductions in state aid, and a new 2% property levy cap that the city will have to adhere to.
Jersey City has $755 million of outstanding debt. It is gearing up to sell $89 million of Series 2010A, B, and C qualified general improvement bonds. Fitch rates the bonds AA-minus, as they are part of the state’s municipal qualified bond program, which allows the state treasurer to direct aid towards a local governments debt service costs, if need be.
Fitch assigns an underlying rating of A-minus to the bonds. Moody’s Investors Service and Standard & Poor’s rate the city A2 and AA, respectively, both with stable outlooks.
“The city’s financial performance remains inconsistent, strained by rising health insurance and other employee-related costs,” Fitch said. “Consistently late introduction and passage of budgets makes officials’ ability to anticipate and respond to shortfalls challenging although officials have taken strong measures during this fiscal year to reduce costs.”
Jersey City is located across the Hudson River from Manhattan. Several big financial firms have offices there, including, Goldman Sachs, JPMorgan, Citi, and Bank of America Merrill Lynch.
The city is transitioning to a fiscal year that begins Jan. 1 rather than July 1. During this period, the state has allowed Jersey City to skip its pension contribution and temporarily exempt it from the new 2% property levy cap, Fitch said.
To help curb rising taxes, lawmakers earlier this year passed a bill to limit property tax hikes to 2%. Municipalities are still able to boost property taxes beyond the 2% cap to meet debt-service costs and pension and health care payments.