Municipal enterprise projects that are struggling to meet operating and debt-service costs could be a default risk as cash-strapped states and cities become less likely to offer such entities direct aid, according to Moody's Investors Service.
In a sector comment released Monday, Moody's noted two problematic solid-waste facility authorities: the Camden County Pollution Control Financing Authority in southwestern New Jersey and the Harrisburg Authority in Pennsylvania's capital city.
"As state and local government support becomes less reliable and subject to the unpredictability of the political process, stressed enterprises will face challenges that could lead to actual defaults," Moody's analyst Kristina Alagar Cordero wrote.
The PCFA avoided a potential default on a $25.2 million final bond payment due Dec. 1 after the state allowed the authority to tap into its restricted funds. While New Jersey helped out with $2.1 million, the state had allocated enough funds in the past to the PCFA and other incinerators to help cover all principal and interest costs.
Harrisburg guarantees $282 million of outstanding incinerator debt sold through the Harrisburg Authority. The facility has not generated enough revenue to meet debt-service payments and the city did not include the payments in its current budget. Mayor Linda Thompson's 2011 budget proposal also does not include those obligations.
Moody's noted that most municipal enterprise developments fully support themselves and help subsidize their local government's general fund operations. Many cities and states may not be able to step in with financial assistance for enterprise projects that are fiscally unstable.
"In instances where enterprise systems are not self sufficient, the typical and expected state or local government support, whether voluntary or guaranteed, may not be forthcoming, leaving these struggling municipal enterprises to fend for themselves," the Moody's report reads.
Separately, GridLex, a financial research and data analytics company, released outstanding debt data Monday for New Jersey counties. GridLex has been publishing financial reports for one year and is located in Manhattan. Its founder and chief executive officer is Nikhilesh Rao, a former associate at Booz & Co.
The firm calculated total outstanding debt per employed person for counties in the Garden State. Total county debt includes short and long-term debt of the county, its school districts, improvement authorities, cities and towns, and all other local borrowing entities.
GridLex used outstanding debt listed through the Municipal Securities Rulemaking Board for debt maturing after Nov. 15, 2010. It also used the U.S. Bureau of Labor Statistics' September employment numbers for individual New Jersey counties in its calculations.
The data differs from per-capita debt calculations for counties, which compare outstanding debt at the county level with its population.
According to the data, Hudson and Essex counties in northeastern New Jersey have the highest per-employed person debt levels, at $16,766 and $16,091, respectively.
Warren County in northwestern New Jersey has the lowest calculation, with $4,467 per employed resident.