TRENTON – The Joint Budget Oversight Committee approved refunding of transportation trust fund bonds today that should save the state $50 million in debt service in FY 2013.
Treasury officials told the committee that actual savings and the total amount of the transaction will depend on market conditions when the transaction occurs.
The panel was told that the total transaction could be $956 million, and that Treasury intends retiring approximately $939 million. The committee gave the administration authority for as much as a $1.1 billion transaction, but Treasury representatives emphasized what they actually decide to do will depend on market conditions on the day of the transaction.
Committee Chair Sen. Paul Sarlo pointed out that the $50 million savings would be to ease pressure on the general fund, not to fund new transportation infrastructure projects, and he said that that is not exactly the “pay as you go” philosophy the administration has espoused in regards to transportation programs.
Also, he said that should there be a bond premium involved, the state would pay a higher interest rate in exchange for getting an upfront payment.
“In the long term, New Jersey pays more in interest payments,’’ he said.
Committee member Sen. Anthony Bucco countered that the same thing was done under the Corzine administration, which Sarlo acknowledged was the case.
“Basically, we’re giving Treasury the authority to do what they feel is best as the bond market changes,” Bucco said.
Sarlo said there were $250 million in premiums through the last two bond sales.
Treasury officials said that the $1.1 billion is just the “topside” of how much of a transaction Treasury could ask for, but they are not going to market seeking that; they were asking for authorization should market conditions make that feasible.
And in response to a question from Assemblyman Vincent Prieto about possibly spreading out the savings over more years, Treasury said it has been the practice under this administration to “frontload” the savings.