newjerseynewsroom.com

What he described as investor enthusiasm for New Jersey transportation bonds allowed the state government to save $20 million in long-term interest costs on a $600 million sale of bonds “for highway and mass transit transportation projects," state Treasurer Andrew Sidamon-Eristoff said Wednesday.

“Demand was overwhelming, allowing the state and its banks to sell all our bonds in one day rather than the two days usually required for a sale to retail and institutional investors,” Sidamon-Eristoff said. “In addition, state bonds were sold at yields far better than their underlying ratings, which is extremely good news for taxpayers.”

Treasury’s public finance staff offered bonds with maturities ranging from 2 to 30 years. Once the sale began Tuesday morning, Sidamon-Eristoff said it became clear that investors wanted to buy more bonds than New Jersey planned to sell.

The treasurer said the demand allowed New Jersey to greatly reduce the cost of borrowing. He said, for example, that Bloomberg News estimated that investors were expected to demand yields of about 5.77 percent Tuesday from sellers of transportation bonds with 30-year maturities. Instead, he said, New Jersey was able to sell $217.8 million of 30-year bonds at a yield of 5.47 percent.

Sidamon-Eristoff said the favorable yield will save taxpayers nearly $20 million in debt service payments over the life of the 30 year bonds, compared to the 5.77 percent rate cited by Bloomberg. He said similar savings were generated on bonds sold with shorter maturities.

The state government‘s financial problems have led Moodys Investors Service and Standard & Poor’s to lower its bond rating.

But in a review of the state government’s debt, Moodys pointed out that pension and benefit costs are a drag on state finances, but noted that reforms proposed by the Gov. Chris Christie and awaiting legislative action could significantly reduce the state’s pension liability over the long run. In addition, the governor’s proposed changes in employee health benefit could provide “immediate, positive budgetery impact.”

Both Fitch Ratings and Standard & Poor’s have mentioned the positive effects that adoption of Christie’s pension and benefit proposals would have on the state’s fiscal outlook.

“Clearly, the state cannot afford to ignore the critical need for pension and benefits reform,” Sidamon-Eristoff said. “Investors recognize that no one has offered an alternative to the governor’s plan that will provide benefits of the same order of magnitude to both the pension plans and the state budget. Yesterday’s bond sale clearly indicates that investors believe the governor will succeed in his effort to reform the state’s antiquated and unsustainable systems for providing pensions and benefits to public employees.”

– TOM HESTER SR., NEWJERSEYNEWSROOM.COM