New Jersey lawmakers approved the sale of $1.3 billion in Transportation Trust Fund Authority bonds in November to pay for roadwork.
Without the approval, New Jersey would have had to raise the size of its planned $2.1 billion sale of short-term notes in December to continue its highway- and rail-construction program, Treasurer Andrew Sidamon-Eristoff said before the vote. A $3.5 billion sale of tax-and-revenue-anticipation notes would have been the state’s largest and could have placed its short-term credit rating “at serious risk,” he said.
The $1.3 billion sale was authorized by lawmakers in previous years without being issued. In 2010, Democrats delayed a $1.4 billion transportation-bond request, saying Governor Chris Christie, a Republican, needed to present a long-term plan for replenishing the trust fund. Democrats today said the bond issue would help keep construction jobs.
Last year’s standoff led Christie, in his first term, to suspend road construction, leaving 2,000 workers off the job for a day. Lawmakers then relented and approved the funding, including refinancing about $483 million in debt and the issue of $990 million in taxable Build America Bonds.
Christie, 49, offered in January an $8 billion, five-year transportation-funding plan that he said would rely on less borrowing and more cash to pay for projects. It would provide $1.6 billion a year for road and rail work without raising taxes, and a total of $4.4 billion in borrowing over five years.
Democrats today said they still have concerns that Christie’s plan is dependent upon economic growth.
The Transportation Trust Fund Authority has about $12.5 billion of debt outstanding. As of this year, almost all of its $895 million of annual revenue goes to debt service.
“I am very concerned that we are going further into debt without a plan to pay for it, with no identified revenue increase,” said Assemblyman Louis Greenwald, a Democrat from Cherry Hill. Greenwald is co-chairman of the Joint Budget Oversight Committee, which passed the bond measure today.
The state plans to increase cash funding of transportation projects from less than $100 million this year to about $600 million in 2016, Sidamon-Eristoff said.
Christie’s transportation plan called for the trust to borrow $600 million in May and to sell bonds that had been authorized previously and not sold, Sidamon-Eristoff said. The May debt issue financed work through August. Since then, the state has advanced the trust fund about $315 million, he said.
The state has met its cash flow needs by drawing on a temporary line of credit set up at the beginning of the current fiscal year in July. As of Oct. 28, the state has borrowed $1.7 billion through that facility, paying “extremely favorable interest rates” of about 0.63 percent, Sidamon-Eristoff said.
However, terms of the loan stipulate a “much higher rate” on outstanding balances after Dec. 31, the treasurer said.
“The theoretical alternative of extending the cash flow facility beyond December, at the cost of much higher interest rates, is financially untenable,” Sidamon-Eristoff said.