Officials in Jersey City say the expected success of next week's sale of delinquent property tax liens may force them to reconsider an annual bulk hen sale consisting of the same assets.

During the past two years, Jersey City has entered into two transactions involving 'the sale of bonds secured by a pool of tax liens.

Under the bulk lien sale, the city doesn't directly sell the liens to investors. Instead, the city sells the hens to a trust agent, which finances the sale by issuing bonds. The trust agent privately. places the bonds with investors.

In June 1993, the city sold $44 million of lien securities and a year later sold $14 million of the securities. Both transactions helped plug budget gaps. City officials say the collateralized structure was needed because a poor collection system prevented the city from selling most of its liens directly to investors.

But city officials now say they have revamped their collection system to the point where their annual tax lien sale involving the municipal bond market may become obsolete.

Next Thursday the city will sell tax liens directly to investors. City officials say Jersey City's financial adviser, WR Lazard & Co., expects strong investor demand for the liens.

"A lot depends on what happens next week" said Michael Cook, chief of staff for Jersey City Mayor Bret Schundler. "Some people are suggesting everything will get sold."

Besides the city's stronger collection system, market conditions. have also increased demand for tax liens. The liens typically pay 18% interest and are secured by property. The lien holder-could assume ownership of the property if the owner does not make the interest payments, composed of property taxes and penalties.

But owners fail to make their payments only about 1% of the time in New Jersey, Cook said, making the lien sale an attractive investment.

"The increased demand for liens is a function of the marketplace," Cook said. "We're seeing demand from institutional investors and large retail investors."

In addition, market sources say the Jersey City sale will benefit from the increased market awareness of municipalities' using delinquent property taxes as a way to generate revenues.

New York City, for example, has completed a sale similar to the two Jersey City bond sales. Several counties in New York State have also completed lien financings in the municipal market.

"The institutionalization of this market has helped Jersey City," said Joel Cooper, senior vice president at WR Lazard.

In the event that next week's sale is not a sellout, any unsold delinquencies would be bundled and sold later in a collateralized deal.

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