The New Jersey Transportation Trust Fund Authority plans to market $1.4 billion of bonds this week to finance various capital projects.
The deal begins Wednesday with a $464 million tax-exempt refunding and a $2 million traditional taxable refunding.
The refunding is expected to generate $15.2 million of net present-value savings. Those savings will allow the state to sell more taxable Build America Bonds than would otherwise be the case and stay within the $895 million allocated by the state for transportation capital spending, including debt service. The BAB portion will total $929 million.
“There’s enough remaining capacity in the fund from the appropriation to get $518 million without this refunding, but to get [the additional capacity] we have to do the refunding,” said New Jersey Treasury spokesman Andrew Pratt.
Barclays Capital is book-running senior manager and Wilentz, Goldman & Spitzer, PA is bond counsel.
The refunding bonds will have maturities from 2013 to 2024 with the majority of the debt maturing in 2023. The BABs will have maturities from 2024 to 2027.
Assemblyman Louis Greenwald, D-Camden, who chairs the Assembly Budget Committee, voted against the deal last week because he said it was creating balloon payments in the future for a small amount of savings today.
Pratt said that the debt had to be structured with maturities in later years because debt-service capacity is constrained earlier.
Democratic lawmakers approved the deal anyway after Gov. Chris Christie threatened to halt state transportation projects.
The state has borrowed around $400 million from the general fund to pay for transportation costs.
Bond proceeds from this deal will repay the general fund.
Fitch Ratings and Standard & Poor’s rate the bonds AA-minus with stable outlook. Moody’s Investors Service rates them Aa3 with negative outlook.
The debt is secured by contract payments subject to state appropriation.
Those contracts are funded by transportation-related taxes and fees though the state is on the hook for any shortfalls. The debt is rated based on New Jersey’s general obligation rating.
There is $11.1 billion of trust fund debt outstanding.
Debt service on the authority’s transportation system bonds is met through state contract payments
The bond offering comes as the state may have to pony up $300 million to repay the federal government for funds spent on a rail tunnel that was to run under the Hudson River before Christie canceled it last week.
The status of the project, known as Access to the Region’s Core, was unclear last week.
Christie said he would reconsider after U.S. Transportation Secretary Ray LaHood visited to try to save the project.
Christie, a Republican, said earlier projected cost overruns that would add $2.3 billion to $4.3 billion to the $8.7 billion project begun under his Democratic predecessor were too costly.
New Jersey Transit spokesman Paul Wyckoff said that the ARC project did not use trust fund bonds.