S&P Global Ratings has revised its view of the system support factor in its Institutional Framework (IF) for New Jersey local governments to strong from very strong. "In on our view, while there remains a high likelihood the state will provide extraordinary support, we believe the mechanism in place is no longer proven to restore fiscal stability in times of extreme stress," said credit analyst Timothy Little. However, our overall view of the institutional framework for New Jersey municipalities and counties remains strong.
As we mentioned in our "2015 Update Of Institutional Framework For U.S. Local Governments," published Dec. 28, 2015, our view of New Jersey's system support would change if legislation regarding Atlantic City's finances was not passed within a reasonable time or if other issues arose that would indicate a lack of state support for Atlantic City.
Our revised view reflects:
• The passage of nearly six months since the governor vetoed bipartisan aid to Atlantic City without prompt agreement on subsequent legislation;
• No discernable progress on the development of a credible plan to reduce the city's structural imbalance despite the state taking the
extraordinary action of appointing an Emergency Manager for one year; and
• No agreement on how to address the city's significant outstanding unfunded tax appeals.
"In our opinion, these issues indicate a change in what has historically been very strong state support of its distressed entities," added Mr. Little. We maintain the view that should extraordinary state intervention occur in Atlantic City, we are not confident that it would be sufficient to prevent impairment of the city's debt obligations.
Only a rating committee may determine a rating action and this report does not constitute a rating action.
S&P Global Ratings, part of S&P Global Inc. (NYSE: SPGI), is the world's leading provider of independent credit risk research. We publish more than a million credit ratings on debt issued by sovereign, municipal, corporate and financial sector entities. With over 1,400 credit analysts in 26 countries, and more than 150 years' experience of assessing credit risk, we offer a unique combination of global coverage and local insight. Our research and opinions about relative credit risk provide market participants with information that helps to support the growth of transparent, liquid debt markets worldwide.
