State authority will sell $500 million of New Jersey Transit bonds
A borrowing plan to fund equipment upgrades for New Jersey Transit is moving full steam ahead.
The New Jersey Economic Development Authority board voted unanimously Tuesday to issue $500 million in bonds to assist NJ Transit with purchasing 600 buses and 17 trains. The approval followed a request for proposals issued by state’s Department of Treasury in October that sought responses from broker-dealers for a roughly $750 million bond transaction.
NJ Transit will pledge a portion of the New Jersey Transportation Trust Fund Authority's appropriations backed by gas tax revenues to fund lease payments on the equipment. Repayment of the bonds can take no longer than 28 years with the annual interest capped at 6%, according to NJEDA documents.
“The bonds will fund previously Board-approved purchases of commuter buses and locomotives,” NJ Transit spokeswoman Nancy Snyder said in a statement. “The bonds will also help provide near-term support for important, but unfunded, capital projects to improve the customer experience.”
Gov. Phil Murphy has made improving NJ Transit one of his chief goals since assuming office in January 2018 with the state’s operating subsidy increased the last two years.
New Jersey Department of Treasury spokeswoman Jennifer Sciortino said the bonds are slated to be offered in early January with the NJEDA’s involvement allowing the sale to proceed quickly, as opposed to issuing state general obligation bonds that would require voter approval. Sciortino also stressed that the public bond sale will differ greatly from a $300 million NJEDA borrowing for state house renovations under previous Gov. Chris Christie that was conducted via a private transaction directly to a bank.
“The bonding is being pursued at this time because market conditions are very favorable and NJT is currently entering into contracts for the necessary equipment,” Sciortino said in a statement. “Had the state decided to use general obligation bonds, at best, it would be a full year before NJT has the money to begin financing this pressing need after voter approval is obtained and the transaction is put together.”
New Jersey GO bonds are the second lowest rated among the 50 U.S. states due largely to a rising pension burden. 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.
NJEDA and NJ Transit entered into a similar agreement in concert with the Murphy administration last year on a proposed $600 million bond issuance to fund a replacement of the Portal Bridge over the Hackensack River as the first phase of the long-stalled Gateway project. The bonds have yet to be issued because of the federal government’s lack of commitment to share in the costs of the project to replace a century-old rail tunnel under the Hudson River connecting northern New Jersey with Manhattan’s Penn Station.