October 22, 2010
The State of Vermont’s recent $50 million bond sale to support its annual capital program garnered the lowest interest costs the State has incurred in memory. The State locked in a total interest cost of 2.58 percent over the 20-year life of the bonds, the lowest rate in records dating back to the 1960s. The proceeds of the bonds will fund infrastructure projects authorized by the State Legislature in the last session.
Contributing to the very low interest cost were the State’s high credit rating, a very low interest rate environment, and use of Build America Bonds. Build America Bonds, often referred to simply as “BABs,” were made available under the American Recovery and Reinvestment Act of 2009.
“It is too bad that the Build America Bonds program is set to expire on December 31,” said State Treasurer Jeb Spaulding. “The economic benefit to Vermont has been considerable. In this deal alone, we saved taxpayers more than $2 million in interest payments over the life of the bonds, compared to the use of traditional tax exempt bonds. I hope Congress will take up the matter when they reconvene later this year and extend the program.”
The Treasurer’s Office sold the bonds approximately one month ahead of the typical schedule to take advantage of near record low interest rates. Eight bids were received, several from firms bidding on Vermont’s bonds for the first time. Vermont has the best bond rating of all New England states: Triple-A by the Moody’s and Fitch agencies and Double-A+ by Standard and Poor’s.
November 16, the State plans to target the sale of an additional $25 million in general obligation bonds to Vermont investors. Vermont Citizens’ Bonds will be sold as tax-exempt bonds through a negotiated offering. An underwriter for the sale is being selected though a competitive request for proposals. These bonds are reserved first for purchase by Vermont residents and businesses. The bonds are projected to close on November 30.
“We want to give Vermont investors a greater chance to buys these bonds so we have increased the amount for sale from $20 million to $25 million,” said Spaulding. “Citizens’ Bonds are free from state and federal taxes and may be purchased in denominations as low as $1,000.”
Vermont investors interested in purchasing Citizens’ Bonds should contact their local broker for more information. The State will post the names of the investment banking firms assisting with the sale on the Treasurer’s web site in early November at www.BuyBonds.Vermont.gov.
The State also will continue to monitor interest rate trends for an opportunity to refinance existing bonds in conjunction with the Citizens’ Bond sale.
Source: Office of the State Treasurer
Last Updated at: October 22, 2010 12:45:40