Political jockeying over funding for the New Jersey Transportation Trust Fund is putting capital projects throughout the Garden State in danger if state lawmakers don't find a long-term solution.
The authorization for the TTF, which was originally formed in 1984 to help fund New Jersey's transportation infrastructure, expires June 30.
New revenue is needed if the authority is to take on new transportation projects, but that is the crux of a fight in the state capitol at Trenton.
Gov. Chris Christie has resisted efforts by some Democratic lawmakers to increase the gas tax to support the trust fund and did not include any funding for the New Jersey Transportation Trust Fund Authority in his $34.8 billion 2017 fiscal budget proposal released in February.
The program was last reauthorized in 2012.
"This administration stands ready to consider any proposals that might be passed by the legislature, as the executive branch can't fix this issue without their action," said Christie spokesman Jeremy Rosen. "If legislative Democrats' only idea is to raise the gas tax, they must initiate it as a bill in the state Assembly, according to the state constitution. Every option is on the table but it must represent tax fairness for the people of New Jersey."
State Sen. Paul Sarlo, D-Wood Ridge, who chairs the Senate Budget and Appropriations Committee, outlined a potential tax cut proposal aimed at garnering support from Christie and the Assembly for a gas tax increase.
"It's time to stop the gimmicks, take the band aid off and replenish the Transportation Trust Fund," he told reporters earlier this month.
The trust fund spent $1.6 billion last year, which includes about $350 million for Port Authority of New York and New Jersey projects that are carried on the Port Authority's books.
"We believe a $2 billion transportation trust fund is needed," said Sarlo during the hearing. "It has got to be a dedicated source of revenue, multiyear plan."
Most of the $1.26 billion state appropriation to the trust fund is used for debt service.
Sarlo didn't indicate how much the gas tax should be increased, but the state's current 14.5-cents-per-gallon rate is second lowest in the U.S. behind only Alaska, according to the Tax Foundation.
Chris Santarelli, a spokesman for the New Jersey Department of Treasury, said he expects that the annual capital program will remain at $1.6 billion in the 2017 and that a new authorization will be approved soon.
"The size of the capital program and its funding mechanism will be determined over the course of this spring via discussions between the Legislature and the Governor," said Santarelli. "We are confident that such negotiations will reach their natural conclusion, resulting in a new authorization prior to the end of this fiscal year, as has been the case for each of the five previous reauthorizations of the Transportation Trust Fund."
New Jersey has the second lowest credit ratings of the U.S. states -- A2 from Moody's Investors Service and A from Standard & Poor's, Fitch Ratings and Kroll Bond Rating Agency -- due largely to underfunded pension liabilities.
The NJTTFA -- with $18.2 billion in debt outstanding, according to Moody's -- is notched one level below the state by Moody's, Fitch and S&P, based on the state's appropriation pledge.
Moody's assigned the A3 rating and a negative outlook to the authority's most recent $626.8 million bond issue in November, a rating that reflects Moody's assessment of New Jersey's overall credit quality, with the standard notch downward for appropriation risk.
"At the current appropriation levels ($1.26 billion in fiscal 2015), there is limited capacity for additional borrowing to fund future projects," Moody's said in the rating report on the trust fund. "Absent an increase in revenues or reduction in other spending areas, any increase in appropriations to cover additional debt service or pay-go projects would further pressure the state's General Fund Budget."
Moody's analyst Baye Larsen told The Bond Buyer that the TTF is funded enough to meet its debt obligations, but that future and existing projects could be in jeopardy if a solution isn't reached soon. She said the state's credit challenges also could prove problematic for the transportation trust fund in the near future.
"The transportation trust fund does not have a rapidly growing revenue stream that would support new borrowings for capital projects or a pay-as-you-go basis," said Larsen. "Transportation funding access to states is challenging for all states and especially New Jersey which has major infrastructure needs. These are expensive capital needs and the revenue supporting these needs has been relatively flat and stagnant."
Janney Capital Markets municipal analyst Alan Schankel noted in a February report that NJTTFA funds raised through taxes and fees can be used only for transportation purposes, but are not specifically pledged to support the issuer's debt service. He said around $1.2 billion annually of trust fund authority revenue is used to support debt service, but that the state must supplement these revenues with general fund appropriations.
"Failing to fund it could impair future construction," said Schankel. "There are some serious issues."
Martin Robins, director emeritus of the Alan M. Voorhees Transportation Center at Rutgers University, points responsibility at the transportation funding crisis on shoulders of Gov. Christie, saying he should have had a plan in place well in advance. Robins said there is enough money for debt service on outstanding bonds, but expressed concern about delaying much-needed transportation projects. He added that New Jersey risks losing up to $1.6 billion in federal matching funds if a new funding plan for the TTF is not formed.
"You are seeing projects that are being frozen because of uncertainty with the funding," said Robins, who previously held leadership roles with the New Jersey Department of Transportation, New Jersey Transit and the Port Authority of New York and New Jersey. "We keep slipping further and further behind in terms of fixing bridges and we are falling further behind in fixing pavement."
Santarelli, the state treasury department spokemsan, says "projects are not being frozen. There has been no official action taken to freeze projects."
Robins said the transportation trust fund has had its share of problems going back to 2000 and is critical of Christie for eliminating pay-as-you-go financing and replacing it with further borrowing, adding to its debt burden. He also added that the Republican governor
"He turned the transportation trust fund into a bonding vehicle and added greatly to the indebtedness of it," said Robins. "This could be a very, very serious problem."
