MOODY'S ASSIGNS 'A1' RATING TO NEW JERSEY CERTIFICATES
MOODY'S ASSIGNS 'A1' RATING TO NEW JERSEY CERTIFICATES NEW YORK, Dec. 12 /PRNewswire/ -- Moody's Investors Service has
assigned a rating of "A1" to an offering by the State of New Jersey of $10,835,000 certificates of participation (taxable series 1991) dated Dec. 1, 1991, which is expected to be sold Dec. 12.
Certificate security rests with the credit standing of the State of New Jersey, which has agreed to make lease payments equal to debt service requirements as they come due. The state's payment obligation is absolute and unconditional, but is subject to annual appropriation by the legislature. Certificate proceeds will be used to construct a marine sciences research laboratory on land owned by the federal government. Use of the facility will be shared by a federal agency, a New Jersey state agency, and a group of higher education institutions. Should the federal agency's involvement in the facility end, the state would have to consider a substantial increase in its financial commitment to the project: federal law provides that if the facility is not used as a marine sciences laboratory by the state, use of the property shall revert to the National Park Service. The limited nature of the state's payment obligation, the use of certificate proceeds for a facility not essential to traditional state responsibilities, and the potential complications introduced by the federal agency involvement all contribute to the rating assigned. Risk presented by the participation of a private sector entity in the transaction as lessor and assignor of payment rights to the trustee has been mitigated through the transaction's legal structure. New Jersey's broad-based economy, high wealth levels, and moderate debt ratios are the basis for its credit strength. Recent years' economic slowdown and recession, with resulting revenue shortfalls, have forced the state to draw down its once-substantial accumulated surplus and were an important factor behind major tax increases enacted at the start of fiscal 1991. The recent election of a new legislative majority, which attained office by campaigning against the tax increases, contributes to an atmosphere in which significant fiscal restructuring is now likely. Proposals have emerged in the "lame duck" legislature to rescind, effective July 1992, all or part of the tax increases, but offering no further direction for fiscal policy. While these proposals could position the new legislature to address, on a substantive basis, the budgetary issues arising for fiscal 1993, they pose the risk that political posturing would result in the state's dealing with fiscal issues in a piecemeal rather than comprehensive fashion. Moody's will continue to follow these developments, and the context of continued economic adversity in which they occur, for their longer term credit implications. -0- 12/12/91 /CONTACT: George Leung, 212-553-0342, Steven Hochman, 212-553-0338, or Katherine McManus, 212-553-4036, all of Moody's/ CO: ST: New Jersey IN: SU: RTG FC-KW -- NY068 -- 2082 12/12/91 15:47 EST
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|Date:||Dec 12, 1991|
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