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The Transportation Trust Fund provides funding for New Jersey's transportation system

Legislation

The Transportation Trust Fund statute (NJSA 27:1B et al.) was passed into law on July 10, 1984. Major amendments occurred in 1988, 1991, 1995, 2000, 2006, 2012, and 2016. Article VIII, Taxation and Finance, Section II, Paragraph 4, of the State Constitution was also amended on December 6, 1984 to dedicate 2.5 cents of the motor fuels tax to transportation capital improvement purposes. On December 7, 2000 it was amended to dedicate 9 cents of the motor fuel tax, petroleum products gross receipts taxes, and a portion of the general sales tax to transportation capital purposes. In November 2006 it was amended to dedicate all 10.5 cents of the existing motor fuel tax for transportation capital improvement purposes. In November 2016 it was amended to dedicate all the revenue from the State motor fuels tax and petroleum products gross receipts tax to transportation purposes.

Original 1984 Legislation

The original Transportation Trust Fund (TTF) staute was signed into law by Governor Thomas Kean in July 1984 to provide a stable and predictable funding source for transportation system improvements in New Jersey. The legislation created a new Special Transportation Fund, otherwise known as the "Trust Fund," which could be used to fund transportation capital improvements for highways, public transportation and State aid to counties and municipalities. The Trust Fund legislation was created to replace a highly unpredictable level of General Fund support that characterized state transportation funding in the 1970s and early 1980s.

Expenditures from the Trust Fund were to be financed by a new independent financing agency entitled the Transportation Trust Fund Authority ( "Authority"). The Authority was designed to finance Trust Fund expenditures using both state appropriations and its own authority to isue bonds. State appropriations were backed by dedicating a portion of the existing motor fuel tax revenues, contributions from the three highway toll road authorities, and fee increases imposed on heavy trucks.

The Authority was authorized to issue its own bonds with up to 10-year maturities. However, unlike general obligation bonds issued by the State of New Jersey that require voter approval, the Authority was allowed to issue its own bonds without voter approval by only pledging State appropriations received by the Authority.

The Authority and the State Treasurer were to enter into a contract that requires the State Treasurer to make state appropriations available to the Authority if appropriated. For this reason, Authority bonds are typically referred to as "State contract debt"

The statute specified that the Authority would consist of the Commissioner of Transportation, the State Treasurer and three public members chosen by the Governor and Legislature. The Authority was to only issue bonds and invest revenues with no involvement in the selection or management of capital projects. The Legislation included a sunset provision for the Authority to expire in 21 years without reauthorizing Legislation.

The Legislation also authorized an initial four-year capital improvement program which was to run from FY 1985-1988. The program was to be supported by an annual appropriation of $143 million from the State's General Fund. The State's General Fund appropriation was to be backed by several revenue sources. From the 8 cents per gallon gas tax, the revenue equivalent of 2.5 cents of the gasoline tax ($88 million) was to be earmarked for appropriations to the Trust Fund. Contributions from the toll road authorities ($24.5 million) and heavy truck tax increases ($30 million) were also used to support the appropriation.

As designed, the Authority would leverage those dedicated revenues with bonds to support a four-year program averaging $250 million annually. The actual appropriation in each year varied. The Department of Transportation obligated much of its authorized funding during the first three years of the program and requested a new capital program authorization program beginning with FY 1988. The Legislature chose to change the appropriation ceiling for FY 1988 rather than authorize a new program.


Trust Fund Renewal I (1988)

The Legislature "renewed" the transportation program in January 1988 when it authorized a seven-year capital program for FY 1989-1995. The program assumed a $365 million annual State funded capital improvement program. To pay for the larger capital program, the renewal legislation included a planned $331 million dollar annual appropriation into the TTFA.

The new level of appropriation to the TTFA was to be supported by earmarking an additional 4.5 cents of the existing motor fuel tax. Of that amount, an additional 2 cents of the existing 8 cent per gallon tax was to be earmarked for transportation.

The remaining 2.5 cents was to be earmarked from an increase in the motor fuel tax. The gasoline tax was increased from 8 cents to 10.5 cents and the diesel tax from 11 cents to 13.5 cents. A total of 7 cents was earmarked for transportation purposes.

The TTF Renewal Legislation also added language that prohibited the use of TTF monies for the salaries of New Jersey Department of Transportation (NJDOT) and NJ TRANSIT employees. All such costs were to be paid from the State General Fund. In 1990, a state budget crisis prompted last minute legislation to allow $25 million in TTF monies to be used for NJDOT salaries.

An offsetting $25 million in State General Fund monies appropriated to NJDOT for engineering salaries was lapsed to help the state avoid a statewide deficit. The clause preventing use of TTF monies for salaries was deleted from the statute.

 


Cap Lift (1991 and 1992)

In February 1991, the Legislature approved a Department request to increase the capital program authorization from $365 million to $565 million for FY 1991 and FY 1992 in the so-called "Cap Lift" Legislation. In May 1992, the cap lift program was extended at the $565 million level for FY 1993-1995.

The 1992 legislation introduced new restrictions regarding the use of TTF monies for NJDOT and NJ TRANSIT in-house costs. The restrictions were generally modeled after Federal Highway Administration regulations. Under the revised statute, only NJDOT/TTF payroll costs could be charged to TTF and only for specifically defined engineering and planning functions related to capital project advancement.


Although the FY 1992 Appropriations Act allowed NJ TRANSIT to charge "capitalized maintenance" costs to the TTF if they met a four-year useful life criteria, the 1992 Legislation included a section indicating the practice would be stopped beginning in FY 1993 (suspended by subsequent Appropriation Acts).

The 1992 Legislation also included a requirement that the State Auditor conduct an annual audit of NJDOT and NJ TRANSIT to ensure that all costs charged to the TTF were eligible under the statute.



Trust Fund Renewal II (1995)

In May 1995, the Transportation Trust Fund was reauthorized by the Legislature which included a new funding plan as well as additional flexibility to both the Commissioner of Transportation and the Trust Fund Authority to implement that plan. Significant changes in the Legislation were as follows:
  1. Appropriation authority to the Department was increased from $565 million to $700 million annually
  2. The planned length of the new program was five years, FY 1996-FY 2000.
  3. The Local Aid Program could be disbursed as grants rather than solely on a cost reimbursement basis.
  4. The Trust Fund Authority could issue grant anticipation notes and other debt related to anticipated Federal funds.
  5. The Trust Fund Authority could use a variety of modern financial instruments to minimize debt and maximize investment.
  6. Planned constitutional dedication of motor fuel tax revenues changed from 2.5 cents to 7 cents in FY 1997 and 1998, 8 cents in FY 1999, and 9 cents in FY 2000 and thereafter. (A referendum for the constitutional dedication of the motor fuels taxes was approved in November 1995).
  7. The previous bonding cap of $1.7 billion in aggregate outstanding debt was replaced with a $700 million annual cap on bonds issued.
  8. All expiration dates regarding the Trust Fund were eliminated, making it a permanent financing mechanism for transportation investment in New Jersey.
  9. The maximum bond maturity from date of sale was changed from 11 years to 21 years.
  10. The 1992 restrictions regarding the use of TTF monies for NJDOT and NJ TRANSIT in-house costs were deleted and replaced with more general language that allowed charging of non-payroll costs and other indirect costs related to capital program advancement as long as those costs are allocated on a reasonable and consistent basis.

Cap Lift (FY 1998)

In FY 1998, the Legislature approved NJDOT's request to increase the Capital Program Authorization from $700 million to $900 million for a one-year period. The increase was authorized in the annual Appropriation Act. The Department of Transportation indicated this was a one-year adjustment and that the capital program request would revert back to $700 million in FY 1999.


Cap Lift (FY 2000)

The FY 2000 Appropriations Act provided $900 million from the TTFA for the NJDOT capital program. An amendment to the Act raising the annual debt issuance ceiling for FY 2000 from $700 million to $900 million was also adopted by the Legislature.

Trust Fund Renewal III (2000)

In July 2000, the Transportation Trust Fund was reauthorized by the Legislature and included a new funding plan and placed new mandates on the Department of Transportation. Significant changes in the Legislation were as follows:
  1. Appropriation authority to the Department of Transportation was increased from $700 million to $900 million annually in FY 2001 and $950 million thereafter.
  2. Although there was no specific termination date for the new program, financing projections for the program were based on a four-year period ending in FY 2004.
  3. The previous $700 million annual cap on bond issuance was reduced to $650 million.
  4. The dedication of revenues to the Authority were increased by adding the existing petroleum products gross receipts tax and a portion of the existing Sales and Use Tax. Dedication of the petroleum gross receipts tax was set at $100 million in FY 2001 and $200 million in each FY thereafter. Dedication of the general Sales Tax was set at $80 million for FY 2002, $140 million for FY 2003, and $200 million for each FY thereafter.
  5. The size of the Authority's board was increased from five members to seven members in order to add one representative of the transportation trade unions and one representative of the transportation construction industry.
  6. A new seven member TTFA Advisory Board was established to review the Department's plans and programs and make recommendations to the Governor and Legislature.
  7. A new cap was placed on reimbursement for NJDOT/NJ TRANSIT salaries. The cap was expressed as salaries and overhead as a percentage of the State funded capital program each year. The cap was set at 13 percent and applied to FY 2002-2004.

Trust Fund Renewal IV (2006)

In March 2006 the Legislature passed legislation to provide a larger capital program for the next five years. Highlights of the legislation included the following:
  1. The annual capital program authorization was increased from $950 million to $1.6 billion.
  2. Dedication of motor fuel taxes for transportation capital purposes was increased from 9 cents to 10.5 cents with a revenue appropriation no less than $483 million annually.
  3. The annual bonding cap was increased from $650 million to $1.6 billion. The cap was to be reduced by any revenue appropriations in excess of $895 million.
  4. The present value of refunding bond debt service must be less than the present value of bonds being refinanced using the discount rate of the refunding bonds only.
  5. No Transportation Trust Fund appropriations can be spent for emergency response operations, access permit review, or TRANSCOM.
  6. The Commissioner is required to submit a Transportation Master Plan, a Statewide Capital Investment Strategy, an Annual Transportation Capital Program, a Transportation Trust Fund Authority Financial Plan, and a Five Year Capital plan.
  7. A Financial Policy Review Board is established in but not of the Department of Transportation to monitor and certify that the Transportation Trust Fund Authority has adhered to its bonding limitation, that amounts spent on permitted maintenance did not exceed the amount spent during FY 2007, and that total, annual capital appropriations have not exceeded $1.6 billion.
  8. The minimum State aid program was increased from $30 million to $175 million.
  9. The maximum bond maturity from date of sale to maturity was changed from 21 years to 31 years.

Trust Fund Renewal V (2012)

In June 2012, the Legislature enacted legislation reauthorizing the Transportation Trust Fund (TTF) program for five years, from FY 2012 through FY 2016. Highlights of the important provisions and changes authorized in that legislation are noted below:

1. Transportation Capital Program

The legislation established a transportation capital program in an amount not to exceed $1.6 billion annually from FY 2013 through FY 2016. In each year, that amount includes a TTF component and a portion funded by the Port Authority of New York and New Jersey for specific highway projects that relate to Port Authority facilities (i.e. Lincoln Tunnel Access Program), as outlined below:

    FY TTF Port Authority NY/NJ Total
           
    2013 $1,247m $353m $1.600m
    2014 $1,224m $376m $1.600m
    2015 $1,225m $375m $1.600m
    2016 $1,247m $353m $1.600m
    Total $4,943m $1,457m $6,400m


    Of the total $6.4 billion program authorized over the four years, the TTF provided spending authority of $4.9 billion and the Port Authority will provide $1.5 billion. (Note: the Port Authority of NY/NJ also provided $343m in fiscal year 2012, yielding a grand total of $1.8b in resources.)

    2. Transportation Trust Fund Authority (TTFA) Debt Issuance

    In support of the TTF component of the program, the legislation set the following annual caps on debt issuance by the Authority, which total $3.5 billion over the four year period:

    Fiscal Year Annual Bond Cap
    2013 $1,247 million
    2014 $849.2 million
    2015 $735.3 million
    2016 $626.8 million
    Total $3.458 million



    (The balance of the TTF program was to be funded primarily from pay-as-you-go appropriations.)

    3. TTFA Bonds

    Bifurcates the Authority's bond financing program into two components: bonds issued and refunding bonds to be issued under prior reauthorizations, which are labeled as "Transportation System Bonds" or "Prior Bonds", and bonds issued under the 2012 reauthorization, to be known as "Transportation Program Bonds", the latter of which may only be paid from revenues dedicated under the State's Constitution. The legislation also established separate Transportation Trust Fund sub-accounts to discretely track the debt service payments for each type of bond.

    4. Flexibility in Bond Issuance

    Allows up to 30% of the Transportation Program Bonds that are permitted to be issued in a given year to be issued instead in a preceeding fiscal year.

    5. Carryforward of Unused Bond Cap

    Maintains the provision authorizing the carryforward of unused bond cap from one fiscal year to the next.

    6. Joint Budget Oversight Committee

    Maintains the pre-existing requirement for approval by the Joint Budget Oversight Committee (JBOC) of refunding bonds but no longer requires JBOC approval of statutorily authorized bonds that are carried forward to subsequent FYs.

    7. Dedicated Revenues

    Subject to appropriation by the Legislature, the law retained the statutory and constitutional dedications of revenue, as highlighted below:


    Constitutionally-Dedicated Revenues

    • Motor Fuels Tax - amount equivalent to 10.5 cents per gallon of tax imposed, but not less than $483 million per year;
    • Petroleum Products Gross Receipts Tax - not less than $200 million during any fiscal year;
    • Sales and Use Tax - not less than $200 million during any fiscal year

    Statutorily-Dedicated Revenues (Additional Fund Sources)


    • Toll Road Authorities - monies received pursuant to the Toll Road Authority Contracts of not less than $24.5 million per fiscal year;
    • Motor Vehicle Registrations - amount equivalent to the sum of revenues generated from the increase of motor vehicle registration fees pursuant to R.S. 39:3-20 and the increase in the diesel fuel tax pursuant to R.S. 54:39-27 (as amended by P.L.1984, c.73 and by P.L. 1987, c.460), but not less than $30 million per FY;
    • Additional Motor Vehicle Registration fees - collected pursuant to subsection a. of section 68 of P.L. 1990, c.8 (C.17:33B-63), but not less than $60 million per fiscal year.

    In fiscal 2016, the Legislature appropriated a total of $1,195.9m to the Authority, representing a $64.2m decrease from fiscal 2015, comprised of the following sources:

    $516.0m

    Motor Fuels Tax

    $215.0m

    Petroleum Gross Receipts Tax

    $452.9m

    Sales and Use Tax

    $12.0m

    Toll Road Authority Contributions

    $1,195.9m

    Total

    Trust Fund Renewal VI (2016)

    In October 2016, the Legislature enacted legislation reauthorizing the Transportation Trust Fund Authority program for eight years, from fiscal year 2017 to fiscal year 2024. Highlights of the important provisions and changes authorized in that legislation are noted below:

    1. Bonding authority was increased to $12 billion over 8 years, contingent upon voter approval of constitutional amendment dedicating fuel tax revenue to the Transportation Trust Fund (Note: voters approved the constitutional amendment on November 8th, 2016)
    2. Increased capital program to $16 billion over 8 years (contingent upon passage of supplemental appropriations legislation)
    3. Added a requirement that every project funded by the TTF be included on a website that documents the status of each project, outlines the budgeted amount, the amount spent and committed, and the amount necessary to complete the project, among other reporting requirements
    4. Added a minimum appropriation of $25 million/fiscal year for freight rail projects
    5. Increased the membership of the Financial Policy Review Board to nine public members and renames it the Transportation Policy Review Board, which is tasked with analysis regarding the transportation capital program’s cost-effectiveness, conducting and commissioning research on transportation best practices, making policy recommendations to the Legislature, among other requirements
    6. Established the Annual Transportation Capital Program Approval Committee, which is tasked with ensuring that legislative input is provided in the process of selecting transportation capital projects to be funded by the TTF
    7. Added a minimum appropriation to Local Aid of $400 million
    8. Limited amount from TTF to be spent on salaries and overhead to $208 million
    9. Renamed the NJ Environmental Infrastructure Trust the “New Jersey Infrastructure Trust,” with the authority to make loans and provide other assistance to local government units to finance the cost of transportation projects

New Jersey State Constitution
Article VIII, Section II, Paragraph 4

Dedication for Motor Fuels Tax, Petroleum Products Gross
Receipts Tax, & Sales Tax For Transportation Purposes

4. There shall be credited to a special account in the General Fund: (a) for each State fiscal year commencing on and after July 1, 2007 an amount equivalent to the revenue derived from $0.105 per gallon from the tax imposed on the sale of motor fuels pursuant to chapter 39 of Title 54 of the Revised Statutes; (b) for the State fiscal year 2001 an amount not less than $100,000,000 derived from the State revenues collected from the tax on the gross receipts of the sale of petroleum products imposed pursuant to P.L.1990, c.42 (C.54:15B-1 et seq.) as amended and supplemented, or any other subsequent law of similar effect, and for each State fiscal year thereafter an amount not less than $200,000,000 derived from those revenues; and (c) for the State fiscal year 2002 an amount not less than $80,000,000 from the State revenue collected from the State tax imposed under the "Sale and Use Tax Act," pursuant to P.L.1966, c.30 (C.54:32B-1 et seq.), as amended and supplemented, or any other subsequent law of similar effect, for the State fiscal year 2003 an amount not less than $140,000,000 from those revenues, and in each State fiscal year thereafter an amount not less than $200,000,000 from those revenues; provided, however, the dedication and use of such revenues as provided in this paragraph shall be subject and subordinate to (a) all appropriations of revenues from such taxes made by laws enacted on or before December 7, 2006 in accordance with Article VIII, Section II, paragraph 3 of the State Constitution in order to provide the ways and means to pay the principal and interest on bonds of the State presently outstanding or authorized to be issued under such laws or (b) any other use of those revenues enacted into law on or before December 7, 2006. These amounts shall be appropriated from time to time by the Legislature, only for the purposes of paying or financing the cost of planning, acquisition, engineering, construction, reconstruction, repair and rehabilitation of the transportation system in this State and it shall not be competent for the Legislature to borrow, appropriate or use these amounts or any part thereof for any other purpose, under any pretense whatever.

Article VIII, Section II, paragraph 4 adopted effective November 6, 1984; effective November 7,1995, effective December 7, 1995, amended November 7, effective December 7, 2000, amended November 7, 2006, effective December 7,2006, amended November 8, 2016, effective December 8, 2016

Transportation Trust Fund Statute (27:1B et al) (pdf 171k)



 
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