Moody's Investors Service downgraded the enhanced ratings of 15 New Jersey municipalities participating in a state-supported bond program, citing its recent downgrade of New Jersey.
The action affects cities and towns that participate in the New Jersey Municipal and School Qualified Bond Act.
The downgrade to A2 from A1 May 15 stemmed from Moody's downgrade of the state's general obligation debt to A1 from Aa3 earlier in the week.
In the program, municipal governments and school systems have a portion of their state aid diverted to a trustee who uses the money to make timely debt service payments for the entities.
Moody's downgraded the cities of Bayonne, East Orange, Newark, Orange Township, Paterson, Perth Amboy, Plainfield, Salem, Trenton, and Union City. It also downgraded the towns and townships of Harrison, Irvington, Kearny, Weehawken, and West New York.
Because their short-term debt participates in the program, Moody's downgrade the short-term ratings of Paterson and Trenton to MIG 2 from MIG 1.
Additionally, Moody's changed the outlook of the enhanced ratings of Bayonne City, Jersey City and the City of Orange Township to ratings under review with downward pressure. They are all rated A2 now and may be downgraded to A3, said Moody's analyst Vito Galluccio and vice president Julie Beglin.
The outlooks on all the other enhanced ratings are negative, reflecting the negative outlook Moody's has on its ratings of New Jersey.
Of the 15 downgraded cities, 10 have underlying ratings lower than A2. The exceptions are: East Orange, Kearny, and Orange Township with underlying ratings of A2 and Plainfield and West New York with underlying ratings of A1.
Moody's did not drop Jersey City's enhanced rating - it was already at A2. But it has been put it on review for a further downgrade.
Moody's also did not drop the A2 enhanced rating of North Bergen. Moody's had a negative outlook on the rating. Its underlying rating is Aa3.