The Jersey City Municipal Utilities Authority, NJ (Aa3 negative) will need to adopt aggressive rate increases in the near term in order to preserve its fiscal health while facing heavy capital needs and holding relative weak liquidity.

The MUA benefits from a strong service area, providing water and wastewater services to a fast-growing urban community that continues to attract high-earning, well-educated residents and substantial new development. Debt service coverage is adequate at 2.4x, though liquidity is a weakness at less than 100 days cash on hand, a marked decline from 145 days in 2019 and a product in part of the authority’s delayed rate increases at the recommendation of the state comptroller. The authority's primary credit weakness is its heavy capital investment requirement; debt is already moderately high at 2.9x revenue and will grow as the authority works through a nearly $1.3 billion capital plan. Also important to the MUA's credit profile is its linkage to the City of Jersey City (A1 stable), which controls the authority, guarantees to cure any of its deficiencies, and collects an annual franchise fee from the authority for the rights to the city's water assets.

On April 5, we revised the outlook on the authority to negative, while affirming its outstanding Aa3 bond ratings and MIG 1 note ratings, and assigned Aa3 ratings to the authority's 2024C and 2024D bonds and MIG 1 ratings to its 2024A and 2024B notes.