New Jersey state officials said yesterday that the state can downsize its three toll road authorities without violating bondholder covenants or damaging the bond ratings on the authorities' outstanding debt.

Gov. Christine Todd Whitman's administration is studying ways to streamline the state's approximately 500 agencies, boards, and commissions, including the toll authorities. Specifically, the Whitman Administration may place all three of the state's toll authorities under the control of the transportation department.

The three agencies -- the New Jersey Turnpike Authority, the New Jersey Highway Authority-Garden State Parkway, and the South Jersey Transportation Authority -- have more than $3.5 billion of outstanding debt.

Yesterday, The Bond Buyer reported that any attempts at an outright merger of the three authorities would force a review of the authorities' credit ratings, and may run afoul of Internal Revenue Service refunding guidelines.

But yesterday, state officials and a high-ranking credit rating executive downplayed the impact of a possible consolidation on the state's bond rating, as well as the legal obstacles involved.

In fact, Whitman Administration spokesman Carl Golden said "there are no plans to merge" the three agencies, and that the state is aware of the credit and legal implications that may result from a consolidation of authorities that have outstanding debt.

"They all have their own projects underway, and their own bond indebtedness to finance them, and their own revenue streams," Golden said.

The Whitman Administration is examining a vast reduction in the size of state government, Golden said, including consolidation of state agencies. The study has just begun, he said, but the administration might make a number of recommendations to the state legislature by the time fiscal 1995 budget talks begin in February.

Golden said the state's efforts to streamline the toll authorities are nothing new. A merger was proposed as early as 1971, he said, and an umbrella agency was proposed at that time.

"We are looking at all of the boards, commissions, and agencies, looking to see what can be cut loose," Golden said. The administration is also reviewing what agencies should be beefed up or have other agencies folded into them, he said.

Hyman Grossman, a managing director at Standard & Poor's Corp., also said a consolidation could take place without harming the authorities' credit rating.

Grossman rejected concerns raised by other credit raters that a merger would require an advanced refunding of debt, a move that could violate Internal Revenue Service limits on refinancings.

"There are other ways to reorganize without collapsing outstanding debt," Grossman said. "In my judgment, there would be no IRS problems because there's no absolute requirement to do refundings."

On Tuesday, Marci Herzlinger Tavashi, manager of the toll road group for Moody's Investors Service, said a change in the toll authorities' structure would lead to a credit review of the state's toll authorities.

But Grossman said yesterday that Whitman's consolidation plans would not necessarily have credit implications. Standard & Poor's ratings are based on traffic trends and debt service coverage, he said, and any plans he has heard about have not altered his views about the toll credits.

The New Jersey Turnpike Authority has already reduced about 20 people "with encouragement from the government," Grossman said. Vacant positions are being decertified, he said, and the turnpike is also losing some jobs to attrition and early retirement.

James Crawford, executive director of the South Jersey Transportation Authority, which manages the Atlantic City Expressway, said his agency is looking at reducing costs through the common purchase or sharing of trucks, computers, and other equipment used by the three toll agencies.

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