Says One-Shot Revenue Scheme Wastes Money
Senate Republican Leader Tom Kean sent a letter to Acting Treasurer Elizabeth Maher Muoio today to advise that he is exploring legal action to prevent the pending closing of a $3.2 billion sale of Tobacco Settlement Bonds.
Sen. Tom Kean said he is exploring legal action to prevent the pending closing of a $3.2 billion sale of Tobacco Settlement Bonds by the Murphy Administration. (Pixabay)
In the letter, Kean said the transaction effectively extends the final payment date of tobacco bonds more than 40 years beyond their initial issuance in 2003 and 2004 — well beyond what is permitted under the New Jersey Constitution which requires principle and interest on all bonds to be paid within 35 years.
“The Murphy Administration is blatantly ignoring provisions in the New Jersey Constitution that are meant to protect taxpayers from irresponsible debt schemes like this tobacco bond refinancing,” said Kean. “The issuance of this debt will cost New Jersey taxpayers hundreds of millions of dollars in exchange for a one-shot $250 million budget grab. We are calling for the immediate cancellation of the refinancing, and are exploring our legal options to prevent the closing.”
Article 8, Section 2, Paragraph 3 of the New Jersey Constitution provides that all debt must provide for the payment of interest and the discharge of the principal within thirty-five years from the time it is contracted.
The debt being refunded by the Tobacco Settlement Financing Corporation was first issued in 2003 and the final maturity of the refunding is 2046 – 8 years beyond the New Jersey Constitution’s requirement that the interest and principal be paid and discharged within 35 years (2038).
Kean expressed further concern that that investors in the debt sale are already selling their bonds at a significant mark-up only days after the bond pricing, causing one Bloomberg Intelligence analyst to note: “It would suggest the State left some money on the table as they continue to struggle financially.”
“This tobacco bond scheme has hit the trifecta of being unconstitutional, costly for taxpayers, and so poorly structured that the Murphy Administration is effectively giving away money to investors while simultaneously demanding billions in new taxes from New Jersey residents,” added Kean. “Given the cost, this isn’t something that should be rushed as appears to be the case. While I’m hopeful that litigation won’t be necessary to prevent the closing from taking place, we’re exploring every option to protect New Jersey taxpayers.”
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