DALLAS - Texas will offer the largest issue of tax and revenue anticipation notes in four years with a $6.4 billion deal next week.
The notes will be sold competitively through Grant Street Group Aug. 19. RBC Capital Markets serves as financial adviser on the deal, with Vinson & Elkins as bond counsel.
Paula Griffin, Trans project manager at the comptroller's office, attributed the larger issue this year to a lower unrestricted general revenue fund balance for the fiscal year ending Aug. 31. The balance was lowered from $9.4 billion in fiscal 2008 to $5.5 billion in fiscal 2009 beginning Sept. 1, due mainly to school property tax relief measures approved by the Legislature in 2006.
The state issues the notes annually to cover cash-flow gaps caused by uneven revenue collections. This issue is the largest since a $6.6 billion sale in 2004. Issues have fallen from a peak of $7.4 billion in 2003 to a low since then of $4.6 billion in 2006. Last year's issue rose slightly to $4.9 billion.
Texas Comptroller Susan Combs said the issue's top scores from all three rating agencies indicates recognition of the state's comparatively healthy economic environment.
Standard & Poor's, Moody's Investors Service, and FitchRatings "took notice of Texas' strong employment growth and the fact that the state largely avoided the housing price bubble - and the bursting of that bubble - experienced by many other states," Combs said.
Combs also noted the state's oil and gas revenues, "which are on track to provide a transfer of $2 billion more into the state's rainy-day fund."
While the Trans are not considered general obligations, debt service comes from deposits in the sinking account in the state's note fund. The sinking account is made up of investment earnings and transfers from the general revenue fund.
This year's notes represent 9.7% of fiscal 2009 revenues. The projected $2 billion general revenue fund cash balance ending fiscal 2009 is 9.2% of cash flow after repayment of the notes, Fitch analysts pointed out.
"The Texas economy has enjoyed strong growth in recent years with gains since 2004, well ahead of the nation," they noted.
Texas employment rose 2.9% in 2007 and rose 2.3% in June from a year earlier. Personal income grew 6.7% in the first quarter of 2008, compared to 6.7% nationally.
The sales tax, Texas' main revenue source, is up 6.1% for 10 months of fiscal 2008 through June 30 from the same period last year and is 5.6% over forecast.
Oil and gas tax collections continue to rise above the same period a year ago and are $1.4 billion above projections. The expanded franchise tax is in its first full year of collection. Excess amounts are transferred from the general fund to the property tax relief fund.
