New Jersey's lame-duck Legislature was expected late yesterday to introduce a proposal that would allow the financially troubled Sports and Exposition Authority to sell $420 million of bonds backed by the state's credit.
The money would be used to refinance old authority debt, build a new convention center in Atlantic City, and upgrade sports facilities at Rutgers University.
Opponents criticized the idea as an attempt by Democrats to rush a costly proposal through the Legislature before ceding power to the new Republican-dominated Legislature taking office next month. But backers say any upfront money New Jersey pays to finance the package will be more than offset by the economic development and debt service savings it will create for taxpayers.
About $193 million of the total is earmarked for a refinancing of outstanding bonds, some of which carry interest rates as high as 10.75%, explained John Samerjan, a spokesman for the authority. Given New Jersey's superior ratings, the new bonds would probably come at rates below 7%, generating an expected savings of $170 million, Mr. Samerjan said.
The state would pay about $17.6 million in annual debt service to repay the bonds. But the authority is required to turn over any surplus revenues to the treasury, and financial projections predict the refinancing would eventually spur enough surplus to more than offset that cost, according to Clifford Goldman, a financial adviser to the authority and the state's former treasurer.
In part because of a decline in racetrack revenes, which authority officials attribute to a nationwide decline in the sports as well as competition from Atlantic City casinos, the authority has not had any surplus revenues to give the state since 1985. By 2005, however, the refinancing will allow a large chunk of authority debt to be paid off, and the resulting debt service savings turned over to New Jersey coffers.
But Mr. Goldman said the refinancing would only make financial sense if the state's credit is tapped. Given the authority's financial difficulties, a stand-alone bond issue could probably not be sold at rates low enough to make the deal worthwhile.
Much of the opposition to the package is directed at the capital proposals involving the convention center and upgrades at Rutgers, with critics saying the authority is already overextended with existing facilities and an ongoing project to complete a new aquarium in Camden.
But Mr. Samerjan said the stagnant economy offers an "extraordinary opportunity" to inject new economic development in the region through capital construction programs, and he stressed that prompt passage is required to capitalize on the current low interest rate environment.
Although much of the opposition is coming from the Republican camp, the bill's sponsoer is a Republican, Sen. William L. Gormley, whose Atlantic County district would benefit from the proposed convention center.
And the incoming Republican chairman of the Senate Budget, Finance, and Appropriations committee said this week he supports the package as well.
Senator-elect Robert Littell, R-Sussex, said the refinancing should be done quickly to gain the expected debt service savings. He also said a convention center for Atlantic City makes good economic sense, because it would position the city to capitalize on the growing convention business nationwide.