New Jersey kicks tires on potential NJ Transit bonds

Gov. Phil Murphy’s administration is exploring a large bond sale to finance New Jersey Transit equipment upgrades.

A request for proposals the Department of Treaury issued in October sought responses from broker-dealers for a roughly $750 million bond transaction around January 2020 to pay for “various buses and/or rail rolling stock.” The RFP did not provide a specific breakdown about the potential borrowing’s proceeds and debt structure, but indicated that the New Jersey Economic Development Authority could play a role in executing the sale.

Marc McAndrews/Bloomberg

“This RFP for investment banking proposals was merely exploratory in nature right now given the fact that interest rates are very favorable at the moment and NJ Transit is a top priority of the administration,” Treasury Department spokeswoman Jennifer Sciotino said in a statement.

In October 2018, Murphy released an audit saying the agency had inadequate financing for its $5.3 billion of capital assets. The 179-page report also noted that a lack of consistent state funding contributed to a myriad of problems at the nation’s largest statewide mass transit system, including delayed infrastructure repairs.

Murphy has made improving NJ Transit operations one of his chief goals since taking office in January 2018, and his 2020 fiscal year budget directs $75 million of new direct funding toward the system. The Democratic governor has also sought to end the practice of diverting New Jersey Turnpike Authority dollars toward NJ Transit to fund day-to-day operations.

“Treasury and EDA have posted an RFP to look into different ways to finance rolling stock,” NJ Transit spokeswoman Nancy Snyder said in a statement. “This is exploratory in nature to see what the market has to offer, however we are not committed to issuing any bonds at this time.”

The NJEDA did not immediately respond for comment about the RFP. The agency teamed up with NJ Transit and the Murphy administration last year for a proposed $600 million bond issuance pitched by the Murphy administration to fund New Jersey’s portion of replacing the 1910-built swing-span Portal Bridge over the Hackensack River. The Portal replacement, which would mark the first phase of the long-stalled Gateway project replacing a century-old rail tunnel under the Hudson River, has yet to take flight because the federal government isn't committing to share in the costs.

New Jersey general obligation bonds have the second lowest ratings among the 50 U.S. states due largely to escalating pension liabilities. The Garden State’s debt is rated A3 by Moody’s Investors Service, A-minus by S&P Global Ratings and A by Fitch Ratings and Kroll Bond Rating Agency.