State
throws school debt into string of
refinancings
Tuesday, December 14, 2004 • BY DUNSTAN
McNICHOL • Star-Ledger Staff
For the third time in a week, officials announced plans
yesterday to rework portions of New Jersey's outstanding
debt to reduce how much the state will have to repay in its
upcoming budget.
The latest transaction is designed to save $41 million
in loan payments that will come due in the next budget year
by refinancing $624 million in bonds the state has issued to
bankroll school construction projects. The proposal won
approval from the state's Economic Development Authority
yesterday.
It was the third re-funding deal state officials have
unveiled in the past week as they scramble for ways to cut
expenses in the face of a $4 billion shortfall in revenues
projected for the budget, which will take effect next
July.
Last week, lawmakers endorsed a proposal to refinance
about $700 million in outstanding general obligation bonds,
deferring $430 million in loan payments that would otherwise
be due over the next 19 months. That deal increases the
overall cost of the borrowing by $106 million, officials
said.
A second deal approved by lawmakers last week involved
refinancing $1 billion worth of bonds issued for state
highway projects. That deal, which adds $17 million to the
state's overall repayment cost, is designed to accommodate
$1.7 billion in new highway borrowing over the next 1 1/2
years.
By contrast, the proposed refinancing of the school debt
will decrease interest costs overall by about $30 million,
EDA board members were told yesterday. In the short term, it
will cut $41 million from interest payments, said Tom Vincz,
a spokesman for state Treasurer John McCormac.
State officials declined to release a year-by-year
comparison of the existing and revised payment schedules,
saying the proposal would not be made final until the bonds
are issued next month.
Critics have complained that the debt restructuring is a
costly way to buy time while state officials look for a
solution to the ongoing fiscal problems. Vincz said the deal
approved yesterday will cut the cost of the school borrowing
by 3 percent, even as it reduces expenses in the upcoming
budget.
"We are always seeking opportunities to refinance debt
to save taxpayers money," he said.
Dunstan McNichol covers state government issues. He can
be reached at dmcnichol@starledger.com or (609) 989-0341.
© 2004 The Star-Ledger. Used by NJ.com with
permission.
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