New Jersey Governor Chris Christie’s administration intends to sell $1.4 billion in bonds for the Transportation Trust Fund in October and is talking with lawmakers in an effort to end resistance to the transaction, Treasurer Andrew Sidamon-Eristoff said.
The bonds were initially scheduled for sale this month. Democratic Senator Paul Sarlo, co-chair of a committee that must approve the deal, said last week he would withhold consideration until Christie, a Republican, presents a long-term plan for replenishing the transportation trust fund, which is due to run out of money for new projects next year.
“We’re working with the Legislature to answer their questions and hopefully we’re going to move forward” in mid- October, Sidamon-Eristoff told reporters today after speaking at a conference organized by the Securities Industry and Financial Markets Association in New York.
The delay comes as states and local governments face near- record low interest rates in the municipal debt market. Tax- exempt yields dropped 6 basis points to 2.61 percent last week, three basis points above an all-time low set Aug. 25, according to Municipal Market Advisors data.
Sidamon-Eristoff, a Christie appointee, said about $483 million of the deal will be used to refinance debt, allowing the state to use the savings to borrow additional money for roadwork. The remainder will be sold as taxable Build America Bonds, he said. The state also plans to move ahead Sept. 29-30 with the sale of $663 million in general-obligation bonds for refinancing, Sidamon-Eristoff said.
The treasurer declined to project how much in extra borrowing costs the state may face if interest rates rise.
“I understand there’s been some movement in interest rates but I don’t think anyone wants me or any other treasurer to be out chasing interest rates,” he said. “We need to be more deliberative.”
The Legislature’s Joint Budget Oversight Committee must approve the refinancing portion of the sale before it can proceed, according to documents presented at a Transportation Trust Fund Authority meeting this month. The state can’t sell the new-money portion without the refinancing, according to Derek Roseman, a spokesman for Sarlo.
After this year, debt service on more than $12 billion in outstanding bonds will consume the full $895 million in revenue including gasoline taxes that is paid into the transportation fund annually for the next 31 years, authority projections show. Christie has said he’ll release a plan for replenishing the fund in October.
“The administration has reached out to Senator Sarlo to discuss his concerns, and he is hopeful that a path to a permanent solution for the fund will be uncovered so much-needed projects currently under way can continue,” Roseman said in an e-mail.
New Jersey is the third-most indebted U.S. state, with $37.7 billion in gross tax-supported debt outstanding, according to Moody’s Investor Service’s 2010 State Debt Medians report. Moody’s last week lowered its outlook on New Jersey’s bonds, meaning a reduction is possible in the state’s credit rating, now Aa2, the third-highest investment grade.
Sidamon-Eristoff said Moody’s decision not to lower the rating is an endorsement of Christie’s efforts to right state finances.
“From my perspective, the fact that they retained our credit rating should be considered an endorsement of what we’re trying to do,” Sidamon-Eristoff said.
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