The failed EnCap proposal for luxury housing and golf courses on a Bergen County landfill has cost Lyndhurst, N.J., a three-notch downgrade from Moody’s Investors Service that affects $53.5 million of long-term debt.
Moody’s, in a statement late Wednesday, said the drop to Baa1 from A1, with a negative outlook, reflects “a significant reduction in the tax base due to a failed redevelopment project, pressured financial operations with negative reserve levels net of deferrals, reliance on cash-flow notes, [and] use of one-time revenues.” Messages seeking comment were left Thursday with Lyndhurst Mayor Richard DiLascio.
The negative outlook, Moody’s added, reflects ongoing litigation with the New Jersey Meadowlands Commission associated with the scuttled project that has resulted in the loss of the township’s largest taxpayer, EnCap Golf Holdings LLC, and the nonpayment of a material amount of taxes for three straight years.
The $1 billion EnCap project involved a proposal to build 2,600 luxury housing units, golf courses, and hotels on former landfills in Lyndhurst and Rutherford. It collapsed in 2007.
EnCap filed for bankruptcy in 2008 and the following year stopped paying property taxes, “creating a structural gap in the [Lyndhurst] budget,” Moody’s said.
Moody’s said in its report that Lyndhurst’s current fund balance dwindled to $930,000, or just over 3% of revenues, in fiscal 2010 from $5.7 million, or 16.8%, in fiscal 2007.
Fitch Ratings in July downgraded Lyndhurst’s general obligation water utility bonds and general improvement bonds to A from AA-minus.
Over in New York, downgrades also came this week for the two Long Island counties outside New York City.
Moody’s on Wednesday downgraded Suffolk County’s rating on $120 million of revenue anticipation notes, Series 2011 I, to MIG 2 from MIG 1, and placed the county’s Aa2 GO rating, affecting $1.3 billion of debt, on review for possible downgrade.
In a report, Moody’s said its downgrade, as a well as the MIG 2 rating on $400 million of tax anticipation notes, “reflects deterioration in the county’s liquidity position as shown by its updated cash flow projections for 2012.”
Fitch Ratings on Monday downgraded $1.2 billion of Nassau County GO bonds to A-plus from AA-minus, with a stable outlook.
The move came three days after the Nassau Interim Finance Authority, a state-appointed oversight board, approved the county’s $2.6 billion proposed fiscal 2012 budget and four-year plan, which includes $450 million of borrowing over four years to cover tax refunds, employee severance expenses and court judgments.
County Executive Edward Mangano has warned that the county could lay off 400 workers, demote a further 200, and close two police precincts, which he has yet to identify, if unions don’t agree to $150 million worth of givebacks — half by Dec. 15, the remainder by Feb. 1.
The agency, noting that NIFA imposed fiscal control of the county in January, had hoped for budgetary discipline. “However, Fitch has not observed improvement in this area,” it said.