Featured Bond: New Jersey Economic Development Authority, $500 million in Transportation Project Bonds
-by Robert Crump
Our first featured bond of the new decade comes from the New Jersey Economic Development Authority (NJEDA), which is scheduled to issue $500 million in Transportation Project Bonds this coming week. The negotiated sale is scheduled for January 9th with Barclays as the lead manager.
About The Bonds
The 2020 Series A Bonds are special limited obligations of the NJEDA payable solely from the pledged property consisting primarily of rent payment obligations made by the New Jersey Transportation Corporation (NJTC). To secure payment of the Bonds, the two parties will enter into a funding agreement whereby the NJEDA leases 2020 Series A Project from the NJTC for $1. The NJEDA will then sublease the 2020 Series A Project back to the NJTC. Rent payments are derived from annual capital appropriations to the New Jersey Transit Fund Authority allocated to pay-as-you-go capital for the NJTC.
Rent payment obligations are subject to and dependent upon appropriations being made from time to time by the State Legislature for the 2020 Series A Project in a given fiscal year. However, the State Legislature has no legal obligation to make any such appropriations. In the event of non-appropriation under the 2020 Series A sublease, the trustee, on behalf of the holders of the 2020 Series A Bonds, has no remedies. The State of New Jersey is not obligated to pay, and neither the faith and credit nor the taxing power of the State is pledged to the payment of the principal, redemption price, or interest on the Bonds.
Proceeds from the Bonds will be used to finance the acquisition of new commuter buses and trains by the New Jersey Transit Authority, as well to pay capitalized interest on the Bonds and the cost of issuance. The Bonds are subject to optional and mandatory sinking redemptions detailed in the preliminary official statement. Rating agencies have given the Bonds the following ratings; Fitch: A-, Moody’s: Baa1, S&P: BBB+.
In the opinion of bond counsel, interest on the Bonds is exempt from federal income tax and alternative minimum tax. Bond counsel is also of the opinion that interest on the Bonds are exempt from New Jersey State tax.
New Jersey State Agencies
The NJEDA was established in 1974 as a public body corporate and politic, constituting an instrumentality of the State exercising public and essential government functions. Authority has the power to render assistance to governmental bodies, such as the NJTC, through, among other means, taking assignments of rentals and leases and making and entering into all contracts, leases, agreements and arrangements necessary or incidental to the performance of its duties. In order to discharge its responsibilities and fulfill those purposes mentioned above, the Authority is authorized to issue and sell bonds and notes for these purposes, including the 2020 Series A Bonds.
The NJTC was created in 1979 to provide an efficient, coordinated, safe and responsive public transportation system for the residents of New Jersey. Covering a service area of 5,325 square miles with a fleet of 2,221 buses, 1,231 locomotives and rail cars, and 93 light rail vehicles, the corporation is one of the country’s largest transit providers.
NJTC operates a comprehensive, statewide network of public transportation services through its rail operating subsidiary and three bus operating subsidiaries in addition to various contract arrangements for the provision of certain bus operations and special mobility services. To manage and operate its services and facilities, the Corporation employs over 11,000 employees who complete nearly 270 million passenger trips each year.
These details and more on purposes, security, risks and other matters pertaining to these Bonds can be found in the preliminary official statement and roadshow presentation, provided by MuniOS. After registering, if needed, visitors can link directly to the official statement by searching for ‘New Jersey Economic Development Authority’.
Thought the securitization and funding agreement itself it somewhat complex, the ultimate source of payments for these Bonds comes from appropriations by the New Jersey State Legislature. See below for a statistical snapshot of New Jersey’s finances:
Provided above is a quick snapshot of financial characteristics of the New Jersey Transit Corporation, courtesy of Merritt Research Services, LLC. (Merritt believes the data to be reliable but does not make any representations as to its accuracy or completeness). In addition to the Merritt information related to the featured bond, more information can be found on our municipal bond calendar, city, state, and county pages.
These facts and numbers are for informational purposes, and should not be considered an official disclosure for potential investors. Investors should consult the official statement. None of the information provided should be construed as a recommendation by MuniNet Guide, MuniNet LLC, Merritt Research Services LLC, or any of their employees. Information and analysis is for informational purposes only.
Potential investors should rely only on the official documents and figures provided in the official statement (prospectus). Although the numbers presented in this summary are primarily derived from public documents, including issuer audits, issuer reports and other public sources such as federal reporting agencies , they are not intended to replace official information presented in connection with the bond sale. Medians may differ from official sales documents due to methodology or survey base variances.