State Offers $2.8B in Bonds to Help Top off Depleted Transportation Trust Fund

Financial offering — and $500 million private bank loan — bring home the fact that TTF renewal involves significant amount of new debt

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The price of gasoline will go up in New Jersey early next week, thanks to the unpopular fuel-tax increase that Gov. Chris Christie and lawmakers approved this month to renew the state’s broke Transportation Trust Fund. But New Jersey is also looking to investors for a more immediate infusion of cash for transportation projects.

The state this week is offering $2.8 billion in bonds that Department of Treasury officials say will provide new revenue for TTF-funded construction work over the next two years as the trust fund is replenished through an 8-year, $16 billion finance plan recently approved by Christie and lawmakers along with the gas-tax hike. It’s also finalizing a $500 million private bank loan to finance transportation projects, according to Moody’s Investors Service, a Wall Street credit-rating agency.

And while it’s the looming gas-tax increase that’s drawn much of the attention since the TTF deal was first announced, the state’s readying of a new borrowing issue before the tax hike even goes into effect also drives home the fact that a significant portion of the TTF reauthorization involves the issuance of more debt.

The new financing issues come as motorists across the state are gearing up for the gas-tax increase, which will raise the per-gallon levy from 14.5 cents to 37.5 cents beginning November 1, and some lawmakers have already begun debating how best to use the newly authorized transportation dollars. New Jersey has traditionally spent revenue from the gas tax to fund road and bridge work, as well as on mass-transit projects that help relieve pressure on the state’s already stressed roadways.

A group of veteran Democratic senators held a news conference in Hackensack yesterday to call for the long-planned completion of the Hudson-Bergen Light Rail line, which right now does not extend into densely populated Bergen County despite the line’s name. They said the project, which could cost up to $1 billion to complete, should be a top priority. But some Republican lawmakers countered by saying road and bridge work should take precedence as the state once again starts to generate new funding for transportation projects.

New Jersey’s last TTF finance plan expired on June 30, and state-funded road, bridge and rail work across the state was frozen for several weeks over the summer as Christie and Democratic legislative leaders could not reach an agreement on reauthorizing the TTF. But earlier this month they settled on a deal that included several tax cuts along with the 23-cent hike, which is the amount needed to pay off prior TTF debt and also fund new projects. As part of the deal signed into law by Christie on October 14, the state’s 7 percent sales tax will be reduced by nearly 0.5 percent, and the estate tax will be completely phased out by the start of 2018.

The gas-tax increase, which is the state’s first since 1988, will bring in more than $1.2 billion in new revenue annually, but only about $500 million will be available each year to pay for new transportation projects due to the trust fund’s significant debt. The rest of the $2 billion in annual TTF spending is expected to come from new borrowing issues.

New Jersey will qualify for matching federal transportation funds as well, and Treasury officials said yesterday that the bonds that are being offered this week, known as GARVEE bonds, will be backed solely by federal transportation dollars. That will allow the state to benefit from interest rates that will be lower than the traditional bonds that are sold by the state Transportation Trust Fund Authority. The transaction is expected to close on November 3, said treasury spokesman Willem Rijksen.

“The bond sale will provide two years worth of construction funding for the TTFA while the recently enacted funding agreement replenishes the Trust Fund,” he said.

But Rijksen did not comment when asked about the terms of the $500 million bank loan that was outlined by Moody’s.

Meanwhile, at the press conference in Hackensack yesterday, Senate President Steve Sweeney (D-Gloucester) and other Democratic leaders representing Bergen County argued that as the new TTF funding comes in, a top priority should be extending the 15-year-old Hudson-Bergen line, which right now runs for 21 miles along the Hudson River through Bayonne, Jersey City, Hoboken, Weehawken, Union City, and North Bergen.

The planned extension is known as the “Northern Branch Corridor Project,” and transportation experts say it will boost economic development in eastern Bergen County, which hasn’t had its own rail service in over 50 years.

The new extension would push the rail line from the its current terminus at North Bergen’s Tonnelle Avenue station to Englewood Hospital, about nine miles north, while adding seven new stations. The current Hudson County portion provides almost 50,000 rides a day, according to recent NJ Transit figures.
The project’s cost has been estimated at $800 million to $1 billion, but a portion of that — up to 50 percent, experts say — could be paid in matching federal funds through the Federal Transit Administration’s New Starts program, which awards grants for transit capital investments across the country. Lawmakers yesterday said the project is expected to generate up to $3 billion in economic activity for the region.

“No one at the federal level could take this project seriously, even though it was very far advanced in its environmental procedure, until New Jersey showed that it had the wherewithal to put up its local share,” said Martin Robins, a transportation expert and director emeritus at Rutgers University’s Alan M. Voorhees Transportation Center. “And so the vote to rejuvenate the TTF was an essential step to free the project and get it moving.”

While lawmakers couldn’t offer a timeframe for the project yesterday, Robins said an environmental impact study was completed a few years ago and that it could be put up for review by the FTA in under a year. Sweeney and other Democrats said they will push to fast-track the project in the Legislature, where, under the new TTF legislation, it would have to be approved by a panel of transportation leaders.

Part of the legislation to renew the TTF creates the Transportation Capital Program Approval Committee, which will annually review and wield veto power over all state transportation projects paid for by the TTF. The panel is made up of the state transportation commissioner and three “public members,” recommended by the speaker of the house, the senate president, and the governor.

“This is going to take participation, it’s going to take a sense of urgency, though we haven’t seen this yet from the administration,” Robins said. “I think the role of the state Senate is going to be to make sure this project is pursued vigorously.”

But several Republican senators who opposed the gas-tax increase issued a statement yesterday that said revenue from the increased gas tax should not be used to pay for “pork spending” and “pet projects.”

“We warned that this is exactly what they would do, and now they’ve proven us correct,” said Sen. Mike Doherty (R-Warren). “It won’t be long before they’re back asking for another gas-tax increase.”

“When Democrats are done paying for their pet projects with drivers’ tax dollars, very little will be left to improve our highways,” said Sen. Jennifer Beck (R-Monmouth).

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