Essex commissioners approve ECIA consent for bond refinancing of Newark Teachers Village

The Essex County Board of County Commissioners on Wednesday voted to approve a consent resolution permitting the Essex County Improvement Authority to pursue tax-exempt bond financing to refinance existing debt and pay for improvements at Newark Teachers Village, an affordable housing project near Halsey Street.

John Dracovitz of the Gibbons Law Firm, representing the authority, told the board the transaction is structured as nonrecourse to the authority and the county and described a not-to-exceed authorization of $80,000,000. He said the authority’s issuance is expected to be approximately $40,000,000 because other funding sources will participate.

Frank McInerney, the county’s financial reviewer, summarized his diligence and said he had obtained audited financial statements through Dec. 31, 2023. McInerney said the project had experienced difficulty meeting debt obligations in prior years and that the developer supplied projections, which were revised after his questions. He said the materials provided gave him "as much diligence, I think, we have to do" but did not endorse the deal as clearly good or bad.

Commissioners pressed presenters on market risk and protections. Dracovitz said the bonds will be tax-exempt, include customary security provisions such as a leasehold mortgage and indemnities, and — unlike most county-issued bonds — will be offered only to qualified institutional buyers under securities law restrictions so that buyers are sophisticated and will conduct their own underwriting. He said market demand will ultimately determine whether the offering sells and that unrated offerings can take longer to market.

Commissioner Atkinson moved the resolution, Commissioner Mercado seconded, and the board approved the consent resolution by roll call. The final roll call indicated six votes in favor, one opposed (Vice President Cooper), and two absences. The presenters and staff said the county will not provide a guarantee and therefore will have no direct financial liability unless it later agrees to a county guarantee.

The board requested the authority to communicate the disappointment that a representative of the borrowing entity was not present at the meeting to answer questions directly. County staff said they and the authority will continue to work with the ECIA on implementation details.

What happens next: the authority will market the bonds to institutional investors; if investor demand is insufficient the offering could fail to sell, in which case the borrower would need alternative financing options.