Bond Buyer: New Jersey bill would let municipalities borrow to ease coronavirus revenue woes

By Andrew Coen

A municipal bonding bill approved by New Jersey lawmakers Thursday that would enable local governments to borrow to offset some revenue losses driven by the COVID-19 pandemic may not get the blessing of Gov. Phil Murphy.

The Democrat-controlled state Senate approved the legislation Thursday in a party-line 25-15 vote, but Murphy has not indicated whether he will sign the measure into law because of concerns about parts of the bill. The state Assembly passed the bill in May.

New Jersey Gov. Phil Murphy has not indicated whether he will sign a bill approved by state lawmakers that would allow local governments to issue bonds to offset revenue losses related to the COVID-19 pandemic. Bloomberg News

The press office for the Democrat governor did not immediately respond for comment.

Lori Buckelew, assistant executive director of the New Jersey League of Municipalities, said local governments need immediate tools to borrow for combatting virus-related revenue hits, which would be delayed if Murphy opts to use a conditional veto on the measure and send it back to the legislature. The Murphy administration and legislators have been communicating about disagreements with aspects of the bill such as oversight of the borrowing, she said.

“We hope it doesn’t get to that point [of a veto] because borrowing is ultimately going to have to part of the solution for local governments to address the revenue shortfalls they are facing,” said Buckelew. “They need the flexibility.”

Municipalities across the state have lost parking and permit fees as well as court fines, and localities are also bracing for bigger revenue declines later in the year from tax appeals, she said.

The municipal borrowing bill would enable localities to issue bonds for up to 30% of their annual budget without customary approval from the state Local Finance Board. Local governments would also not be required to put proposed bond issues before voters and they would have up to 10 years to repay the debt, according to the bill.

Fitch Ratings analyst Kevin Dolan said the borrowing measure would help New Jersey municipalities weather near-term headwinds incurred since the pandemic took hold in March, prompting stay-at-at-home orders and closures of many businesses. The ultimate credit impact of bonding for sustaining operating costs will hinge on how individual municipal government replenish reserves in future budgets, he said.

Read the full report here.