Gov. Nathan Deal announced today that the state of Georgia successfully sold $685 million in general obligation bonds to fund new construction projects and to make repairs and renovations to existing facilities throughout the state.
“These bonds were sold at very low rates given current market conditions and that translates into savings for Georgians,” said Deal. “The state’s AAA bond ratings enable us to invest in vital infrastructure around the state in a fiscally responsible manner and provide for more employment opportunities for our construction industry which was hit so hard by the recession.”
The Georgia State Financing and Investment Commission, which is responsible for issuing the state’s bonds, approved the bond sale at its meeting today. The bond issues were sold on a competitive basis with investors showing solid demand for Georgia’s highest rated bonds.
The state received competitive bids Wednesday and secured rates of 3.33 percent for the 20 year tax-exempt bonds and 1.03 percent for the five year tax-exempt bonds, with a blended rate of 3.20 percent. The state also sold $163.22 million of five year and 20 year taxable bonds at a blended rate of 3.85 percent and $94.35 million of 20 year taxable Qualified School Construction Bonds at a rate of 4.02 percent. The federal government reimburses the state for the interest paid on the Qualified School Construction Bonds, which is a designation that was created in the American Recovery and Reinvestment Act applicable to state bonds which are issued for K-12 school construction projects.
The largest amount of funding is to provide $249.355 million for Board of Regents projects at colleges and universities throughout the state. The second largest amount is $209.505 million for the State Board of Education to provide funding to local school systems for K-12 school facilities. Other agencies that will benefit from the bond proceeds include $38.235 million for Technical College System of Georgia projects, $24.25 million for water and sewer loans to local governments, $26.5 million for Department of Natural Resources projects at State parks. Projects totaling $137.11 million have been designated for several other agencies, including the Georgia Department of Public Safety, Georgia Bureau of Investigation, Georgia Department of Corrections, Department of Juvenile Justice, local library systems and other state agencies.
Moody’s, Fitch, and Standard & Poor’s rating agencies assigned their triple-A bond rating with a stable outlook to the State’s General Obligation Bonds last week. The rating firms’ individual ratings are Aaa, AAA and AAA, respectively. The triple-A ratings reflect the highest rating available and are indicative of the state’s fiscally responsible management.
“Once again earning the top bond ratings during the current economic climate illustrates Georgia’s continued commitment to sound fiscal management while continuing to meet the needs of our citizens for increased educational and economic development opportunities throughout Georgia,” said Deal.
The Bond Ratings
Moody’s Investors Service summarized their rationale for the Aaa rating by stating that, “The highest-quality rating is supported by Georgia’s conservative fiscal management, moderate debt burden and relatively well-funded pensions. Budgetary reserves that were largely used up by the end of fiscal 2010 are slowly being rebuilt. The rating outlook is stable based on our expectation Georgia will take appropriate steps to maintain balanced financial operations and replenish reserves as the economy recovers.”
The Fitch Ratings’ report recognized Georgia’s sound fiscal management practices. “The longstanding ‘AAA’ rating and Stable Outlook on Georgia’s GO bonds reflect its conservative debt management, a proven willingness and ability to support fiscal balance and a diversified economy. The state took repeated action during the recession to maintain fiscal balance through steep spending cuts, use of federal stimulus, and draws from its rainy day fund, the revenue shortfall reserve (RSR). Since then it has maintained a conservative approach to fiscal management, curbing spending growth and making progress in rebuilding the RSR balance. The state’s debt profile is conservative and its debt burden is moderate as a percentage of personal income.”
Standard & Poor’s Rating Services also favorably commented on the state’s fiscal management practices. The report stated that the ratings reflected the agency’s assessment of Georgia’s “well-diversified economy, … strong financial monitoring and oversight with a history of making budget adjustments, mainly through expenditure reductions to restore fiscal balance, revenue shortfall reserve, which is being gradually replenished and … provides the state with some financial cushion, and moderate debt levels coupled with raid amortization of its debt.”