New Jersey taps infrastructure bank to aid municipalities with short-term borrowing
The New Jersey Infrastructure Bank has implemented a backstop municipal note program aimed at bringing fiscal stability to the state’s local governments as they grapple with the COVID-19 pandemic.
The $50 million liquidity program aims to maintain solvency in the state’s 565 municipalities as they struggle with tax revenue losses incurred since the virus’ outbreak caused Gov. Phil Murphy to order a shutdown of all non-essential businesses on March 21.
“This investment will help calm concerns in our local government units about market volatility,” Lt. Gov. Sheila Y. Oliver, who also serves as commissioner of the state’s Department of Community Affairs, said in a statement Monday. “DCA is proud to partner with I-Bank and the New Jersey Department of Treasury to promote economic stability as we ride out this unprecedented crisis.”
The I-Bank’s initiative, which debuted April 15, amends policy to permit it to invest in local government bond anticipation notes under certain circumstances. The program will be limited to I-Bank participants and address failed sales stemming from BANs that rolled over into a new calendar year.
The program will be authorized only during the State of Emergency and will be limited to BAN rollovers the I-Bank identifies as requiring assistance. All BANs under consideration will be limited to a maturity limit of 90 days, with the state Department of Treasury charged with approving the purchases. The appropriate amount to be invested will be determined by members of the I-Bank, the agency’s financial advisor and the Treasurer's Office.
“Treasury was pleased to be a part of this coordinated effort to help address the liquidity challenge many governments are facing right now,” Michael Kanef, director of Treasury’s Division of Public Finance, said in a statement. “We are hopeful that this additional protection will play a significant role in helping our municipalities weather this time of great uncertainty.”
The I-Bank, which was founded in 1985, has triple-A bond ratings from Moody’s Investor Service, Fitch Ratings and S&P Global Ratings. The agency was formerly called the New Jersey Environmental Infrastructure Trust and prior to that, the New Jersey Wastewater Treatment Trust. The most recent change in 2018 came after an amendment change expanding its authority to make transportation infrastructure loans.