Governor Murphy, Economic Opportunity for All
Bond Buyer: New Jersey governor willing to accept Fed’s offer to buy municipal debt
by Andrew Coen
New Jersey Gov. Phil Murphy wants to take advantage of the Fed’s new powers to purchase municipal debt.
With the state facing a revenue shock because of the COVID-19 pandemic, Murphy said last week he wants lawmakers to consider a proposal for the U.S. Federal Reserve to purchasing municipal bonds from the state.
The Democratic governor didn’t say how much he wants to borrow, but noted that the central bank’s new program committing to buying up to $500 million in bonds from states and local governments would cap New Jersey’s total at $9 billion.
“This is something that I feel personally pretty strongly we need to have as a tool in our toolkit,” Murphy said during his COVID-19 press briefing Thursday. “We are going to have serious cash flow challenges.”
The Murphy administration sent draft legislation for the “New Jersey COVID-19 Emergency Bond Act” last week detailing how the measure would grant special borrowing powers normally restricted by the state. While New Jersey’s state constitution forbids bonding for purposes of sustaining annual operating costs, it provides exceptions “for purposes of war, or to repel invasion, or to suppress insurrection or to meet an emergency caused by disaster or act of God.”
The debt proposal would authorize the issuance of general-obligation bonds and “emergency liquidity notes” along with applying for loans from the federal government. The borrowing would be repaid through sales and property tax revenues. New Jersey’s current 6.625% state sales tax and local property taxes collected by municipalities would be increased if funds were insufficient to meet debt payments.
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