Thirty-seven New Jersey municipalities have announced plans to issue $637 million of bonds later this year to cover operating expenses for the first six months of 1991, with some governments preparing to more than triple their outstanding debt levels as a result.

The Florio administration has required many local governments to switch their calendar year budgets to coincide with the state's July 1 start date, and the bond proceeds will be used to cover operating expenses for the Jan. 1 to June 30 transition period.

The requirement was designed to enable towns and cities to end the costly practice of issuing temporary notes at the start of the calendar year, in anticipation of state aid payments that do not show up until July.

But in some cases, the amount of bonds that will have to be issued will vastly increase local governments' outstanding debt. The city of Elizabeth, for example, has a total of only $38 million of outstanding bonds, but just won authorization from the state to sell $38 million of "fiscal year transitional bonds" later this year.

And Hoboken will see its outstanding debt increase more than any other municipality, skyrocketing from its current $4.6 million to $36 million, according to the New Jersey Local Finance Board.

Critics of the move, including state Republican leaders and some municipal finance officials, contend the decision to allow bonding for operating expenses is a political maneuver by Gov. Jim Florio to manufacture temporary property tax relief in time for the November elections, at the expense of local credit quality.

In addition, they say, the state is using the program as an excuse to delay aid payments to local governments until after the start of the 1992 fiscal year on July 1, to ease its $773 million 1991 shortfall.

Emma Byrne, a spokeswoman for Gov. Florio, said decisions on how large a bond issue is needed to implement the plan are up to local government officials. "We expect that each municipality will be making responsible fiscal decisions," Ms. Byrne said.

L. Mason Neely, chief financial officer for East Brunswick, said cities that decide to bond operating expenses will eventually pay the price in creditworthiness.

"This is stacking up future debt for current operations, which is how Philadelphia and New York City got into trouble," Mr. Neely said. "This thing is going to have ramifications down the road."

East Brunswick was told by the state to make the transition as well, but city officials sought and won an exemption, citing a fear that the bonds would adversely affect the city's finances, Mr. Neely said.

He explained that increased local government costs and deferred capital projects were two of the problems that could hurt cities that decide to bond operating costs, he said.

And it could also mean lower credit ratings, according to Standard & Poor's Corp.

In a recent assessment of the Florio plan, the rating agency warned that if the bonds being issued for operating expenses "appear to unnecessarily strain the community's financial position or creditworthiness, S&P would seriously consider negative rating actions."

On the other hand, Standard & Poor's said, if the policy stabilizes cash-flow needs by more closely aligning state aid payments with local budgets, it could be viewed as "reasonably sound financial management."

But several municipal finance sources said plans for huge bond issues by some towns and cities are anything but sound.

"It's unbelievable what's going on," one source said. "The amount [of proposed borrowing] blew my mind." He added that cities' borrowing power will be severely limited in the future, and many will have to put off needed capital projects.

Jersey City, which currently has $161 million in outstanding debt, plans to issue $129 million in transition bonds this year. That would put the city over its debt limit of $266 million, but the state has already granted an extension of the limit, according to Mary Tyrell, assistant finance director for the city.

"In effect, municipalities are helping the state balance its budget, so they're not being overly critical" of requests for debt limit waivers, Ms. Tyrrell said.

Ms. Tyrell said officials in Jersey City are "fully cognizant" of the problems associated with using long-term debt to fund ongoing operations. But, she said, the impetus is to get the city's fiscal calendar to jibe with the state;s, thereby improving cash flow.

In 1990, she noted, Jersey City was unable to pass a budget until September -- nine months into the fiscal year -- because of uncertainty over the state's budget.

Whether the program will actually result in local property tax cuts remains to be seen, because the communities involved will not complete their 1992 budgets until next month at the earliest.

Several local finance officials did predict that the transition bonds will enable them to hold the line against tax increases at least until next year. But Mr. Neely said even if taxes can be shaved this year, the resulting future pressure on local budgets could force increases as soon as next year.

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