Category Archives: Moody’s

Christie’s Cuts in Aid Imperil Moody’s Ratings for Six Cities

File this news brief under the title of “Collateral Damage” as a consequence of Governor Christie’s numerous line item vetoes of the budget that Democrats sent him last week and the Democrat’s unsuccessful efforts to override them.


By Elise Young – Bloomberg.com

Six New Jersey cities including the capital, Trenton, have their credit ratings under review for possible downgrade by Moody’s Investors Service after losing aid in Governor Chris Christie $29.7 billion budget.

The notice came hours after the Democrat-led state Senate failed yesterday to override Christie’s veto of $139 million in so-called transitional aid to some of the poorest cities.
Moody’s, in a report, said it placed Camden, East Orange, Passaic, Paterson, Trenton and Union City on a watch list and expected to finish its review within 90 days, a window during which the Legislature “may restore all or some of this aid.”
The company report called the aid loss a “credit negative” to those municipalities plus Bridgeton City, Harrison, Irvington and Prospect Park. “Credit negative” indicates Moody’s is more inclined to cut ratings.
The review of the six cities will involve a study of any plans to offset the loss of aid, which Christie cut to $10 million from $149 million for the fiscal year that began July 1.
“Given the magnitude of the adopted state-aid reductions and required process for implementing workforce reductions, we believe that city managers may be challenged to achieve the necessary savings quickly to prevent further financial decline,” according to the report.
Christie, 48, a first-term Republican, chopped almost $1 billion in budget items added by Democratic lawmakers, saying the state couldn’t afford the expenditures.
Most Downgrades
For Camden, with a Ba2 rating from Moody’s, or two steps below investment grade, transition aid of $69 million last year amounted to 38 percent of its spending plan. Paterson, with a Baa1 rating, or third-lowest investment grade, received $22.3 million last year, for 7 percent of its budget.
In May 2010, Moody’s lowered Trenton to A3, the fourth- lowest investment grade, after a previous Christie cut in aid. Communities in New Jersey, the second-wealthiest U.S. state, led the country in downgrades last year.
Kevin Roberts, a spokesman for Christie, declined to comment. Andy Pratt, a spokesman for Treasurer Andrew P. Sidamon-Eristoff, didn’t respond to an e-mail. Mark Albiez, chief of staff to Union City Mayor Brian Stack, who also is a Democratic state senator, didn’t return telephone calls. David Rousseau, a financial consultant to Trenton, didn’t respond to an e-mail….

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Filed under Bloomberg, credit ratings Camden, East Orange, Gov. Chris Christie, line item veto, Moody's, Passaic, Paterson NJ, Trenton, Union City

>Tony Fiore Respondes to Latest Robo-Call

>Over on his “new” blog provided by Middletown-Patch, Middletown’s acting mayor Tony Fiore, has addressed the latest robo-call that was sent out by the group Concerned Citizens Of Middletown, that talked about the amount of debt the Township is carrying. If you ask me, Fiore’s response just lends credence to the message that went out last Friday.

His answer is the same stock answer that has been given many times before but only this time he providers a true debt number of $72million that so many before him have been reluctant to confirm!


And how is it that Mr. Fiore is so sure who is responsible for these robo-calls when so many (myself included) do not? He blames the Middletown Democrats for placing them, which if that was the case, I think I would know about it. It seems to me that these robo-calls have struck a nerve and seem to be factual based by his response to them.

Also I believe, the point of how much debt the town can borrow itself into, is a silly one; who cares what a towns’ or persons’ credit card limit is when it is already difficult to meet the minimum payments on the balance!

Middletown hasn’t had it debt rating updated in several years, It has been shown recently that credit rating agencies like Moody’s and Standard & Poor aren’t worth much. After the financial meltdown of the past few years, many of the investments that caused the near collapse of the economy were rated A, AA, or AAA from both of these institutions. Knowing that why would anyone want to tout how special they are? They’re not.

On the final point about the blocking of a return phone number, I don’t know what Fiore is talking about, unless he wants to incite others into believing that these messages have no integrity, which I’m sure is his intent, he is living up to him nick-name of the “Fibber”. Every call that I have received by Concerned Citizens of Middletown, including Friday’s, had a return number left on my caller-id.
True it wasn’t a Middletown phone number or one from the immediate area (I think it was Dunellen), but there was in fact a phone number associated with the call.
On a side note – I don’t know how Fiore’s blog on Middletown-Patch works, but this posting was dated Tuesday May 24 at 12:58 PM, right in the middle of a busy work day. Doesn’t Tony have a job that he needs to attend to at 1pm in the afternoon? True, he may have been on his lunch hour but I think not. Working on Township business (which this clearly is), on company time is a No-No as everyone knows.
I wonder what his employer would think????

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Filed under blog, bonding debt, Concerned Citizens of Middletown, debt service, Middletown NJ, Middletown Patch, Moody's, Robo-calls, Standard and Poors, Tony Fiore

>NJPP Monday Minute 12/20/10: Deficit be Damned: Everyone Gets a Tax Cut Next Year

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This Christmas, we’ll all be getting a gift from Congress – two more years of Bush-era tax cuts. Never mind that Congress is paying for them with a credit card; they’ll square up the $860 billion bill with the Obama Administration down the road.

The thing is, the biggest gifts went to the wealthiest taxpayers.

A recent analysis by Citizens for Tax Justice, a Washington-based public interest research and advocacy organization, estimates that the compromise plan agreed to between President Obama and Republicans in Congress would give 25 percent of the total value of the tax cuts to the wealthiest 1 percent of all Americans. The President had originally proposed not extending the tax cuts for those with income of more than $250,000 a year.

The CTJ analysis also estimates the impact of the compromise on a state-by-state basis. In New Jersey, that’s an average benefit of $443 for the poorest 20 percent of earners and an average benefit of $93,350 for the wealthiest 1 percent.

The compromise plan extends to everyone the current federal income tax rates for two years, cuts the estate tax to below the 2009 level and cuts Social Security payroll tax deductions for all workers by 2 percent.

Income Taxes
Federal income tax rates were lowered twice during the Bush administration, in 2001 and again in 2003. Although each act had its own legislative history and impact, the two are generally lumped together in terms of their effect on taxpayers and the economy. The two acts significantly lowered federal marginal income tax rates for nearly all taxpayers. Both were set to expire at the end of 2010.

The debate in Washington has centered on whether the tax cuts should be extended and who should benefit. The president’s plan favored lower and middle income families and allowed rates to rise on the wealthiest taxpayers. Congressional Republicans wanted the current tax rates made permanent for all.

Congressional Republicans prevailed-but only temporarily. The tax cuts were extended two more years, at which time they will be subject to another debate.

Estate Taxes
The debate on the estate tax centered on Obama’s effort to maintain estate taxes at the 2009 level, which exempts the first $3.5 million of an estate and taxes the remainder at a rate of 45 percent. The compromise exempts the first $5 million and taxes the remainder at 35 percent.

Payroll Taxes
The compromise includes a 2 percent payroll tax cut (from 6.2% to 4.2%) for all workers. That is significantly less than the president’s “Making Work Pay” proposal, which would have eliminated the 6.2 percent payroll tax on the first $6,450 ($12,900 for couples) in earnings. The impact of this 2 percent cut is greater on lower income earners because only the first $107,000 of income is subject to payroll taxes.

According to CTJ’s analysis, the top 1 percent of taxpayers in New Jersey with incomes averaging $1.8 million will receive over 30 percent of these benefits from the income tax and estate tax provisions. When payroll taxes are taken into consideration, lower and middle income earners fare better. While some of the tax cuts have boosted take-home pay for middle class families, the tax cuts for the wealthiest are poorly designed short-term stimulus and, more important, ineffective long-term economic policy. Increasing the take-home pay of low- and moderate-income families will lead to more spending and a boost in demand for necessary goods and services, which in turn creates more jobs. By contrast, tax cuts for the wealthy are more likely to be tucked away as savings, which is a relatively ineffective boost to the economy.

Many have argued that tax cuts for the wealthy increase the incentive to invest or create small business jobs, and that these benefits eventually trickle down to average families. But the economic record tells a different story. Of the 10 economic expansions since 1949, the expansion between 2001 and 2009 ranks last in terms of economic growth, national investment, employment and employee pay.

Economist Mark Zandi of Moody’s Analytics estimates (see Table 4 in the report) that every dollar spent making the Bush tax cuts permanent generates only 35 cents of economic activity (permanent corporate tax rate cuts yield only 32 cents). Comparatively speaking, a dollar spent on infrastructure (investing in a transit tunnel under the Hudson River, for example) yields $1.57 return on investment; a dollar spent to prevent layoffs of teachers or police or firefighters yields $1.41; and a dollar to temporarily increase food stamps yields $1.72.

It’s too bad the Obama compromise will only boost paychecks, instead of lifting the entire economy.

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Filed under Bush Tax Cuts, estate tax, income taxes, Monday Minute, Moody's, New Jersey Policy Perspective, payroll tax, President Obama, Social Security