Thursday, May 7, 2009

Bond Sale Nets Historic Low Interest Rates, Saves State More than $34 Million

Annual debt service reduced by $2.3 million, another $32 million captured in one-time savings

Governor Sonny Perdue announced today that the State of Georgia successfully sold $314,530,000 in general obligation bonds to fund new schools, public safety projects, hospital improvements and other crucial infrastructure projects throughout the state. The state was able to lock in a rate of 1.54 percent – the lowest rate in state history – for 5-year bonds and 3.8 percent for the 20-year bonds – the second lowest rate for the state.

The historic rates translate into an annually recurring debt service savings of $2.3 million compared to originally budgeted amounts. This is in addition to annual savings against budget of nearly $6 million attained in February, when the state sold more than $600 million in bonds. Both bond sales are part of the $1 billion capital outlay program approved in the State’s 2009 budget.

In addition to the bond sale for new capital projects, the state was able to refinance outstanding debt at lower rates, netting savings of $32.6 million. These funds will be used to pay off bonds maturing on July 1, which will free up funds budgeted for that purpose to meet other needs in the FY 2010 budget.

“In a year where revenues are down and the budget has been trimmed, we know taxpayers appreciate the state’s continued commitment to manage the budget and our bond program conservatively. We are spending wisely and realizing savings opportunities whenever available,” the Governor said.

This week’s sale was sold on a negotiated basis with both retail and institutional investors showing solid demand for Georgia's high-grade bonds.

Moody's, Fitch, and Standard & Poor's assigned the triple-A bond rating with a stable outlook to the state’s General Obligation bonds last month. The rating firms’ individual ratings are Aaa, AAA and AAA, respectively. The triple-A ratings reflect the highest rating available to government issuers and demonstrate what a great value Georgia municipal bonds are to investors.

“In these challenging economic times, this bond offering gave Georgians the opportunity to invest in the state while strengthening their own portfolio,” said Governor Perdue. “Georgia is one of just seven states with triple-A bond ratings, reflecting the consistent, value-driven management of the state budget over the past few years. The interest savings, combined with current low construction costs, give Georgians a great value on these needed capital projects, which will put many Georgians back to work.”

The Georgia State Financing and Investment Commission officially approved the sale and rate on Wednesday, May 6.
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