19.11.2012 23:33:00

Jersey City (City of) NJ -- Moody's assigns A2 underlying rating and A2 enhanced ratings to Jersey City's (NJ) $37.5 million Qualified General Obligation Refunding Bonds, Series 2012

Affirms A2 rating and positive outlook on $846.8 million of outstanding city and city-guaranteed long-term G.O. debt; delayed debt service payment due to bank error and not reflective of city credit quality

New York, November 19, 2012 --

Moody's Rating

Issue: Qualified Public Improvement Refunding Bonds, Taxable Series 2012A; Underlying Rating: A2; Enhanced Rating: A2; Sale Amount: $25,175,000; Expected Sale Date: 11/30/2012; Rating Description: General Obligation

Issue: Qualified Water Improvement Refunding Bonds, Taxable Series 2012B; Underlying Rating: A2; Enhanced Rating: A2; Sale Amount: $12,295,000; Expected Sale Date: 11/30/2012; Rating Description: General Obligation

Opinion

Moody's Investors Service has assigned an A2 underlying rating with a positive outlook and A2 enhanced rating with a stable outlook to Jersey City's (NJ) $37.47 million Qualified General Obligation Refunding Bonds, Series 2012, consisting of $25.175 million of Qualified Public Improvement Refunding Bonds, Series 2012A, and $12.295 million Qualified Water Improvement Refunding Bonds, Series 2012 B. Concurrently, Moody's has affirmed Jersey City's A2 underlying general obligation rating and positive outlook, affecting $846.8 million of city and city-guaranteed long-term general obligation bonds. Proceeds from the current qualified bonds will refund outstanding General and Water Improvement Bonds for estimated net present value savings of 3.1% of refunded principal without extension of maturity.

SUMMARY RATINGS RATIONALE

The city's A2 underlying rating reflects the city's very large tax base, high debt burden and narrow, although improved, fund balance position. The positive outlook reflects the city's improved financial position with structurally improved operations, dramatically increased wealth levels and strong prospects for continued tax base growth.

Future rating reviews will incorporate the ongoing effects of Hurricane Sandy on the issuer's overall credit profile as it finalizes damage assessments in the coming weeks.

The A2 enhanced rating on these bonds, which is one notch below the programmatic rating of A1, reflects weak debt service coverage provided by qualified revenues (state aid) under the State of New Jersey's Municipal Qualified Bond Act.

Due to an error by the city's banking facility, a debt service payment on the city's long-term debt was not remitted when due on November 1. The missed payment was quickly identified and paid by the city the following day. The bank's missed payment was caused by disruption from Hurricane Sandy and the widespread power outages that resulted from it. Moody's has affirmed the rating given that the missed payment was not an error on the part of the city as it had made arrangements for with the bank for a wire transfer well in advance. This rating action is consistent with our approach as detailed in Moody's Rating Implementation Guidance titled "Moody's Approach for Assessing the Rating Impact of Debt Payments That Are Missed for Operational or Technical Reasons," published on February 7, 2011.

STRENGTHS

-Continued PILOT revenue growth

-Long-term tax base growth expected

-Excess levy capacity under 2% property tax levy cap

-Very sizable tax base

-Improved wealth levels

-Structurally balanced financial operations

WEAKNESSES

-Still-narrow fund balance and liquidity

-High debt burden

-Low pension funding

-Decline in equalized valuation

-Ongoing exposure to tax appeals

POSITIVE OUTLOOK

The positive outlook reflects the city's improved financial position with structurally improved operations, dramatically increased wealth levels and strong prospect for continued tax base growth. Future rating reviews will consider the city's success in maintaining structural balance and preserving financial flexibility, particularly with respect to excess levy capacity and Current Fund balance reserves.

What could make the rating change - UP

-Continuation of structurally balanced operations across funds

-Growth in reserve levels in step with budgetary growth

What could make the rating change - DOWN

-Resumption of structural budget imbalance

-Depletion of reserves

-Deterioration of the city's tax base

-Borrowing for cash-flow purposes

The principal methodology used in this rating was General Obligation Bonds Issued by U.S. Local Governments published in October 2009. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

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Josellyn YousefAsst Vice President - Analyst Public Finance Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Geordie Thompson VP - Senior Credit Officer Public Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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