Newark, N.J., today will competitively sell nearly $100 million of short-term debt to help roll over existing notes and support capital improvements throughout the city.
The sale includes $61 million of general improvement bond anticipation notes, $29.9 million of school notes, $5.6 million of water utility Bans, and another $2 million of special emergency notes to support the city’s zoning plans. About $58 million of one-year note proceeds will refund outstanding notes and the remaining $40.5 million will help finance infrastructure needs.
NW Financial Group is the financial adviser for the deal and Gluck Walrath LLP is bond counsel.
Moody’s Investors Service rates today’s sale MIG-1 — minus the $2 million of special emergency notes, which do not carry a rating. Moody’s rates the city’s $249 million of outstanding long-term debt Baa2. Standard & Poor’s and Fitch Ratings do not rate Newark.
Moody’s noted in its report that Newark should receive sufficient interest from the market as the credit “has demonstrated solid access to the capital markets” in previous note sales, including five to seven bids the city received for each of the five note series Newark sold in April 2007.
The city anticipates holding a refunding bond sale in the spring and may refinance the notes at that time. Linda Landolfi, finance director for Newark, said officials have yet to pin down the size of that upcoming deal as the city is reviewing how best to structure that transaction.
“We’re working with our financial advisers and we’ve gotten a number of proposals from a variety of underwriters so we’re trying to work with those numbers and trying to decide what would be best in terms of our interests,” Landolfi said.
City officials also are finalizing Newark’s budget for fiscal 2008, which began on Jan. 1, 2008. Mayor Cory Booker will give his state of the city address next month, and officials are waiting to release the 2008 budget as the state informed municipalities to hold off on publicizing budgets until the Department of Community Affairs irons out details of a new 4% tax levy law.
“All the municipalities have been asked not to introduce any of their budgets until they get more detailed instructions from the Department of Community Affairs on how exactly the cap levy will work and so we’re just waiting on that,” Landolfi said.
The city is working on reducing its $100 million structural deficit. During the past few months the mayor has generated $17 million through employee reduction and curbed health benefits for employees by $20 million.
Newark will see additional revenues from the new Prudential Center, a 17,500-seat arena that opened in October. The city anticipates special taxes and increased parking fees and ticket surcharges connected to the new arena to bring in $5 million to $10 million per year, according to a Moody’s report.
In addition to those revenues, Newark’s tax base has increased to $16.5 billion in 2007, more than triple the city’s tax base size in 1999 due to economic development initiatives.
Challenges for the city include its reliance on non-recurring revenues, most notably yearly payments of $40 million the city receives from the Port Authority of New York and New Jersey, which will end in 2010. In addition, more than a quarter of Newark’s residents live under the poverty level.
Newark is located in northeastern New Jersey, 15 miles from Manhattan. With a population of 281,400, it is the state’s largest city.