First of Its Kind in New Jersey; NJEDA Bond IssueEnables Six Municipalities to Save Money in...

Business Editors

TRENTON, N.J.--(BUSINESS WIRE)--Nov. 21, 2000

A cost-effective method to borrow nearly $21 million. This is the bottom line benefit for six small New Jersey communities that are part of the New Jersey Economic Development Authority's (NJEDA's) first tax-exempt

The new financing program is aimed at New Jersey municipalities that do not have access to county-sponsored pooled financing programs to borrow money on a long-term basis for such capital needs as equipment or building improvements and for debt refinancings. The pool concept was developed and initiated by the New Jersey Conference of Mayors, which sought out the assistance of the NJEDA because of its experience in arranging nearly $14 billion in bond financings throughout New Jersey over the last 25 years.

The six municipalities participating in the initial pooled financing and their loan amounts are: Bethlehem Township (Warren County), $3,075,000; Blairstown Township (Warren County), $1,128,000; Burlington City (Burlington County), $4,812,000; Chatham Township (Morris County), $9,073,000; Frenchtown Borough (Hunterdon County), $1,304,000; and Sandyston Township (Sussex County), $1,423,000.

"The NJEDA's goal is to identify financing gaps and then create a structure that makes financial sense," says Coscia. "In this situation, we were able to link the needs of the public sector with the resources of the private marketplace in a unique way. The pooled structure allowed these small communities to get the advantage of a triple A credit rating and gain access to public markets they could not normally afford to tap on their own."

According to NJEDA Executive Director Caren S. Franzini, the participating municipalities saved money in several ways. In addition to benefiting from the high credit rating, they were able to share in the costs involved in selling the bond issue. The sale also provided them with an alternative to bond anticipation notes as a means of financing capital improvements. "Now that we have this first bond sale as a model, future ones should be easier to undertake," Franzini says.

Repayment of the principal and interest on the bonds is guaranteed by Financial Security Assurance Inc., which resulted in an Aaa credit rating from Moody's Investors Service. The interest rates on the tax-exempt bonds range from 5.00% to 5.50% with terms extending from one to 20 years.

Donald Fauerbach, executive director of the New Jersey Conference of Mayors, believes that other towns in New Jersey will be anxious to take advantage of this financing tool now that they have a proven example of what it takes to participate. He thinks it can be valuable financing vehicle for municipalities that do not have access to county-sponsored pooled financing programs.

Under the program, known as the New Jersey Governmental Loan Pool Program, a municipality must first go through its local approval process for incurring debt and may also need approval from the State's Local Finance Board, which evaluates whether the locality can manage the additional debt. Once these approvals are received, the municipality can apply to the NJEDA for assistance.

According to Frank T. Mancini Jr., managing director of the NJEDA's Investment Banking Division, the program is very flexible and the participating municipalities utilized the bond proceeds to finance capital improvements or equipment, refinance certain outstanding bond anticipation notes and finance unfunded bond ordinances.

Although each project will be funded as part of a larger issue, each municipality has its own loan repayment schedule and is responsible for its portion of the debt only. Each community stands on its own credit and is unaffected by the credit of other municipalities in the pooled issue.

Municipalities interested in learning more about this program, should contact the Conference of Mayors at (609) 989-9216 or (609) 989-9226. The Conference will assist a municipality in preparing the application and then forward it to the NJEDA for processing.

The program was developed by the New Jersey Conference of Mayors. Realvest Capital Corporation served as Program Advisor to the Conference of Mayors. The $21 million bond issue was underwritten by Commerce Capital Markets, William E. Simon & Sons Municipal Securities, Inc. and Gibraltar Securities.