Dive Brief:
- The Port Authority of New York and New Jersey has agreed to pay a $400,000 fine to the Securities and Exchange Commission to settle the agency's claims that the authority overstepped its legal power in selling $2.3 billion of bonds as a way of financing several projects, according to Reuters.
- The SEC said the Port Authority went ahead with the sale despite its own doubts that it had the right to do so and did not inform investors about its ability to fund the projects completely.
- Despite SEC claims to the contrary, the Port Authority said it has not admitted wrongdoing by conceding that it committed a securities violation.
Dive Insight:
Experts said the penalty from the SEC could affect the Port Authority's future bond rates. According to The Wall Street Journal, the investigation into the Port Authority's municipal bond issues are part of a nationwide crackdown that has seen the SEC settle charges in various jurisdictions around the country.
Using municipal bonds to finance public works projects has become increasingly popular as borrowing costs — kept in check by low interest rates — make such deals attractive to governmental agencies. As a result, Barclays Plc predicted last summer that municipal bond issues might reach $400 billion in 2016, approaching 2010 levels. However, if the Port Authority is forced to pay higher bond rates because of this latest dust-up with the SEC, that could limit its ability to finance future projects.
This is the latest setback in the cause of New Jersey infrastructure, as the state recently endured a stop-work order this summer courtesy of Christie and an empty transportation tax fund (TTF). After stalled negotiations between Christie and state Democrats last summer over how to counterbalance a gas-tax increase that would replenish the TTF, he stopped work on almost all state transportation projects until an agreement could be reached. Road construction crews were out of work for about 90 days before lawmakers reached a deal.