New Jersey next week will sell $1.8 billion of special obligation notes via competitive bidding to help the state with its cash-flow requirements.
The Garden State typically sells approximately $2 billion of short-term debt in the late summer or fall each year to help boosts liquidity until it receives tax receipts in the spring. The notes will price Wednesday and the Series 2009A transaction is about $200 million smaller than last year's note deal.
The $1.8 billion of short-term debt will mature on June 25, with the state set to pay down the notes from anticipated sales, income, and corporate tax collections and other revenues as opposed to rolling the debt into another note sale or long-term borrowing plan.
Hawkins, Delafield & Wood LLP is bond counsel. There is no outside financial adviser.
Moody's Investors Service rates the note sale MIG-1. Standard & Poor's and Fitch Ratings rate New Jersey's short-term debt SP-1-plus and F1-plus, respectively.
Officials anticipate total general fund revenues to reach $33.46 billion in fiscal 2009, which began July 1. Of that amount, "it is projected that a minimum of 88% of the general fund will be legally available to pay the principal of and interest on the Series A notes," according to the preliminary official statement.
Overall, New Jersey's total anticipated revenues for the current fiscal year are expected to decrease by roughly $135 million, or 0.4%, to $32.36 billion compared to the $32.5 billion of estimated revenue for fiscal 2008, according to the POS. The state received $31.2 billion of total revenue in fiscal 2007.
The decrease in revenues comes in part from a 5.6% dip in corporate tax collections to total an estimated $2.8 billion in fiscal 2009 compared to $2.9 billion and $3 billion of business tax receipts the state gained in fiscal 2008 and 2007, respectively. For the past two years, businesses have been able to deduct net operating losses from their state taxes after officials previously suspended the benefit. Those deductions lower corporations' tax payments to the state.
While the state's corporate tax receipts have declined, officials expect sales and personal income revenues to increase modestly in comparison to prior years.
"When compared to the previous fiscal year, the 2009 revenue projection incorporates nominal growth in personal income tax collections of 0.8% to $12.7 billion and relatively low growth in projected sales tax receipts of 2.1% to $9.1 billion," according to a Moody's report. "Prior fiscal year-over-year annual growth rates for personal income taxes and sales taxes were 7.4% and 3.9%, respectively."
In one recent competitive note deal, Texas sold $6.4 billion on Aug. 19 with those notes also carrying the highest short-term rating. The notes have a 3% coupon and generated effective rates ranging from 1.608% to 1.6604%.
New Jersey's last note sale priced on Sept. 5, 2007 with a 4.5% coupon with yields ranging from 3.6249% to 3.6441%.
