Moody’s Upgrades Newark’s Financial Outlook

NEWARK, NJ — Newark got a thumbs-up from Moody’s Investors Service when the finance ratings organization revised the city’s outlook from “negative” to “positive” last week. Moody’s ratings are used by some investors to gauge an agency’s ability to make interest payments, which can affect a city’s attempts to borrow money or issue bonds. The full Moody’s rating change of Jan. 11 can be seen here.

In their rating, Moody’s stated:

“The revision of the outlook to positive from negative reflects our expectations that the recent positive financial operations will continue, leading to a strengthened reserve and liquidity position. The outlook also incorporates our expectations that ongoing redevelopment will lead to material tax base expansion.”

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Mayor Ras Baraka said that the upgrade from Moody’s was a sign that the city’s financial health is on the rebound.

According to Baraka:

“The fact that we have a positive rating for the first time in eight years reflects Newark’s economic growth, our success in recruiting new job and revenue producing businesses resulting in a larger tax base. It also reflects our success in offering business-stimulating abatements that are financially advantageous to the city and the fact that we have been able to end the practice of borrowing to meet current expenses. For the people of Newark, this financial turnaround has enabled us to hire hundreds of new police officers, avoid the layoffs of the past, require developers to provide affordable housing, undertake an ambitious street-paving and infrastructure upgrade program and expand programs for seniors and young people. The City of Newark is moving forward, and Moody’s decision to upgrade out rating reaffirms that our hard work is paying off.”

Despite the upgrade, Moody’s used cautious language in their Jan. 11 decision:

“The Baa3 rating reflects the city's weak, albeit improved, fund balance and cash position, a sizeable and diverse tax base, and an elevated debt and pension burden. The rating also incorporates the city's weak resident wealth and income levels, elevated poverty, and recent tax base growth.”

According to Moody’s, the city could stand to improve its rating further by:

• Elimination of the city's structural gap by aligning recurring revenues with recurring expenditures
• Timely budget adoption
• Sustained reserve and cash balance improvements on balance sheet
• Reduced deferred charges
• Successful economic development that results in prudently managed recurring revenues

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File photo: City of Newark Press Office, Flickr