Newark, N.J., officials are considering selling certain properties to the Essex County Improvement Authority in a lease-back arrangement to help balance the fiscal 2010 budget.
The plan includes the authority purchasing Newark assets, with sale proceeds filling a $80 million deficit in the city’s $600 million spending proposal for fiscal 2010, which began Jan. 1.
The ECIA would issue bonds to raise capital for the property sales and Newark would then lease those properties from the authority.
Michael Greene, Newark’s acting business director, Tuesday updated the Municipal Council with its plans to sell city property to the authority. The council two weeks ago approved an initial resolution regarding the plan.
“Now we’re getting down to the dirty work to make sure which buildings we’re going to include with this, which ones are fiscally prudent to do, and which ones need the rehab and renovations within it,” Green said. “Then you have to appraise the buildings and ECIA also has to also appraise the buildings so the bond community also will know what they’re investing in and say 'this is prudent policy.’ ”
Greene declined to identify which buildings might go up for sale. The administration believes a lease-back initiative would help close a $80 million budget gap. Last month, officials pegged that shortfall at $70 million.
“It would go a substantial way in closing the budget gap,” Greene said.
Officials are under a tight deadline as the Municipal Council has yet to approve the fiscal 2010 budget. The city will need that spending plan in place by early November in order to mail fourth-quarter property-tax bills.
The lease-back plan requires approval from several government entities. They include Newark’s Municipal Council, the ECIA, Essex County freeholders and the state’s Local Finance Board within the Department of Community Services.
Moody’s Investors Service placed Newark’s general obligation rating on review for possible downgrade Aug. 13 as the city has less than three months to close the budget deficit and finalize a spending plan. Moody’s rates Newark’s $500 million of outstanding debt A2 with a negative outlook.
Mayor Cory Booker earlier this year pushed to form a new bonding authority called the Municipal Utilities Authority to oversee city water and sewer operations. The initiative would have given Newark an up-front franchise payment. The administration was planning to use that payment to balance the fiscal 2010 budget and generate revenue for next year’s spending plan.
Critics said the MUA would raise fees significantly. The Municipal Council tabled the plan in early August.