March 18 (Bloomberg) -- Newark, New Jersey’s credit ratings were put on review for a possible downgrade by Moody’s Investors Service, citing the possibility that the city may come under formal state oversight, as it delays setting its fiscal 2014 budget.
The state’s most-populous city is rated A3, seventh-highest, for its general-obligation unlimited tax bonds and Baa1, one step lower, on its general-obligation limited tax debt, Moody’s said. A change would affect $540 million of outstanding securities.
New Jersey may bring the city under formal oversight, giving the Community Affairs Department more control over Newark’s budget and hiring practices, because state aid could be needed to bridge a projected deficit, Moody’s analyst Josellyn Yousef said yesterday in a statement. The city is likely to increase its tax-anticipation note borrowing this year because of the gap, she said.
“Should information disclosed over the coming weeks reveal that the city’s financial position has weakened or that the 2014 budgeting process will be delayed significantly with a material budget gap, we will likely take negative rating action,” Yousef said.
Newark Mayor Cory Booker, 44, left office in October after he won a special election to fill the opening left by the June death of U.S. Senator Frank Lautenberg, an 89-year-old Democrat. He was succeeded by City Council President Luis Quintana.
Esmeralda Cameron, a city spokeswoman, didn’t immediately respond to an e-mail and telephone call seeking comment on the possible downgrade.
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