Rating Action: Moody's downgrades Union City, NJ's GO rating to Baa3 from Baa2; outlook revised to negativeGlobal Credit Research - 07 Sep 2022New York, September 07, 2022 -- Moody's Investors Service has downgraded the City of Union City, NJ's outstanding general obligation rating to Baa3 from Baa2. The outlook has been revised to negative from stable. The city, at the end of fiscal 2021, had $93.6 million in total debt outstanding.RATINGS RATIONALEThe downgrade to Baa3 reflects the city's continued very weak fund balance and cash levels that are expected to persist through fiscal 2023. The city's long-term liabilities are above-average but manageable and its resident income levels are very weak. Finally, the city does benefit from its proximity to New York City (Aa2 stable) which has been a driver for the ongoing redevelopment in the city.RATING OUTLOOKThe negative outlook reflects the expectation that the city's financial position will continue to remain weak for the foreseeable future.FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS- Material improvement in financial operations through improved reserves and decline in state assistance- Decline in long-term liabilities- Improvement in resident income levelsFACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS- Any further decline in financial operations and inability to improve its reserve position- Increase in long-term liabilitiesLEGAL SECURITYDebt service on the city's bonds is backed by the pledge of the city's full faith and credit backed by its legal obligation to levy ad valorem tax on all taxable property for the payment of debt service without limit as to rate or amount. Certain issuances are also backed by the New Jersey Municipal Qualified Bond Program (A3 stable).PROFILEUnion City is located in Hudson County (Aa2 stable) across the Hudson River from New York City. It is one of the most densely populated cities in the country. METHODOLOGYThe principal methodology used in these ratings was US Local Government General Obligation Debt published in January 2021 and available at https://ratings.moodys.com/api/rmc-documents/70015. Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. 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