Newark’s Municipal Council Tuesday afternoon granted its initial approval for a proposed real estate lease-back agreement to be financed with bonds.

The proposal to sell city assets to the Essex County Improvement Authority and then lease the properties back could help New Jersey’s largest city fill an $80 million budget shortfall. Officials have less than two months to solve the deficit and adopt its $600 million budget for the year ending Dec. 31. The city needs to mail out fourth-quarter property tax bills by early November.

The council Tuesday approved an application to the state’s Local Finance Board and an initial introduction of the lease-back plan. The improvement authority was set to weigh in on the LFB application Tuesday evening, said Jim Paganelli, the authority’s executive director.

“We’re just authorizing the application to [the LFB],” Paganelli said.

Once its approved by the authority, the board could review the lease-back plan at its Oct. 13 meeting. The LFB oversees municipal budgets and borrowing.

The proposal involves the city selling to the Improvement Authority 21 buildings “for an amount not to exceed $85 million,” according the resolution’s legislative details. The ECIA would issue bonds to finance the purchase. Newark would then lease those buildings from the improvement authority, with the city’s lease payments paying down the bonds.

The agreement also provides for $15 million of capital improvements to the 21 buildings, according to the legislative details.

Before the authority could issue the bonds, the lease-back plan would need final approval from the municipal council, the improvement authority, the LFB, and the freeholders of Essex County.

In mid-August, Moody’s Investors Service placed Newark’s $500 million of outstanding general obligation debt on review for possible downgrade, due to the current-year budget woes. Moody’s rates the credit A2 with a negative outlook.

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