Rating Action: Moody's affirms Newark Downtown District Management Corp., NJ's Baa3; outlook revised to stableGlobal Credit Research - 23 Feb 2021New York, February 23, 2021 -- Moody's Investors Service has affirmed the Baa3 rating on the Newark Downtown District Management Corporation, NJ's special assessment bonds and revised the outlook to stable from positive. This action impacts approximately $7 million in rated debt.RATINGS RATIONALEThe affirmation of the Baa3 special assessment rating reflects strong coverage levels, satisfactory legal provisions, a favorable location, and close connections to the City of Newark (Baa2 stable). The district covers the heart of downtown Newark including the Prudential Center and Newark Penn Station. Ordinarily, this is a major credit strength, however, during the pandemic, many of the businesses in the district are either closed or operating at materially reduced capacity.The corporation's close connection to the City of Newark is a double-edged sword; the city authorizes its existence, collects its revenues, and has long been a supporter of its activities. That said, the need for annual budget approval ties the corporation's credit quality very closely to that of the city. As the city has taken a sharp, though manageable, blow from the pandemic, so has the corporation. Because the impact from the pandemic, we consider this action to be driven, at least in part, by social risks.RATING OUTLOOKThe outlook was revised to stable from positive because it is unlikely the rating will move upward in the near term given the operating uncertainty for commercial taxpayers. The outlook also mirrors that of the City of Newark.FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS- Stabilization of operating environment- Upgrade of City of Newark's ratingFACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS- Substantial deterioration of coverage levels- Material weakening of district's tax base and wealth and income levels- Downgrade in the City of Newark's ratingLEGAL SECURITYThe bonds are backed by special assessments imposed on district properties. While the district sets the rate annually and has broad authority to adjust the rate as needed, the budget is subject to the approval of the City of Newark. Favorably, the city has never failed to approve the district's budget, appropriate the necessary funds, or materially delayed remitting the funds to the trustee. That said, it is regularly late in remitting operating funds to the corporation.PROFILEThe Newark Downtown District Management Corporation is government-sponsored entity created under the NJ Special Improvement District Act to promote the economic and general welfare of the district. The corporation is responsible for numerous economic development and beautification projects.METHODOLOGYThe principal methodology used in these ratings was Special Assessment / Special Property Tax (Non-Ad Valorem) Debt published in November 2016 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1044931. Alternatively, please see the Rating Methodologies page on www.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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