The New Jersey Economic Development Authority's new program to improve public school facilities throughout the state got off to a fast start last week when it received an AAA rating and stable credit outlook from Standard & Poor's Corp.
Moody's Investors Service rates the authority's upcoming bond offering Aal.
The state, which lost its giltedged rating in 1992, is rated AA-minus by Standard & Poor's, Aa by Moody's, and AA by Fitch Investors Service.
Authority bond proceeds from a 100 million competitive sale scheduled to be sold tomorrow will be allocated to 131 school districts in each of New Jersey's 21 counties to finance 195 projects.
The AAA rating reflects the authority's strong issuer profile and high debt-service coverage for the bond offering, Standard & Poor's said. The offering is being sold competitively because of Gov. Jim Florio's recent ban on most negotiated bond sales by the state and state authorities.
In a statement yesterday, Florio said, " Because Wall Street's bullish on New Jersey and our Economic Development Authority, they've given our bond issue a triple-A rating. That means we're offering schools some of the lowest interest rate loans ever seen for this kind of program."
Florio added, "Just as important, we're creating 11,000 construction jobs for hard-working men and women all across New Jersey."
The new program, called "New Jersey Works for Schools," will provide $25 million in low-interest loans from a Safe Schools Loan Fund financing construction costs to bring schools into compliance with state health and safety codes.
Another $125 million from the School Facilities Loan Fund will finance school construction, repairs, and alterations.
And $100 million will go to the Small Projects Loan Fund, for school projects that cost less than $5 million and that have been approved under the Safe Schools and School Facilities loan programs.
The full faith and credit of the districts receiving the funds secures each district's loan obligations. Debt service carries a first lien on repayments from the construction projects.
The press release issued by the Florio administration also notes that, "Rather than paying-costs on an individual bond issue, the school districts pay only their pro rata share of the composite bond issue costs. They get what amounts to a 'volume discount.'"
Aside from the $100 million to be raised in the competitive bond sale, the state has pledged an additional $150 million from state general obligation bond sales and general fund revenues. About $45 million of this money will be provided by the state's Economic Recovery Fund and $105 million from state bond refinancings.
These added funds create a debt service pool of $250 million. Authority officials said the debt service ratio would never fall below 1.34 times the amount paid in any of the semiannual payments.
Ratings officials said the relatively high ratings of the counties in New Jersey gave an added boost for the authority's rating for this sale.
Standard & Poor's also said because the largest single outlay of funds is $15 million, the authority is not overly dependent on one school district to make debt service.
The state Department of Education's constant review of other programs in the state also added to Standard & Poor's opinion of the credit.