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From rotten(“in a state of decay”) + borough(“type of administrative district”), because such boroughs were regarded as having “decayed” due to their voters moving away to other places.
[…] Queen's Crawley was no longer so populous a place as it had been in Queen Bess's time—nay, was come down to that condition of borough which used to be denominated rotten–yet, as Sir Pitt Crawley would say with perfect justice in his elegant way, "Rotten! be hanged—it produces me a good fifteen hundred a year."]
parliamentary borough represented in Parliament although the number of voters had diminished so greatly they were largely controlled by the main landowner; parliamentary constituency or electoral district in a similar situation