The Connecticut State Bond Commission on Friday will vote to allocate $1.06 billion of bonds to various state agencies, including $600 million of special tax obligation refunding bonds.
Additionally, the office of Treasurer Denise L. Nappier is seeking authorization from the commission to refund up to $150 million of clean water revenue bonds, which may include refunding $121 million of its auction-rate bonds.
The state has about $183.5 million of auction-rate debt in its $14 billion debt portfolio, which Nappier's office manages. About 9.6% of Connecticut's outstanding debt is variable-rate debt, with auction-rate debt accounting for only 1.3% of the $14 billion.
Officials in Nappier's office said they are looking into possibly refunding the state's auction-rate debt given the current troubled auction-rate market. Still, while Connecticut itself has seen auction failures in recent weeks, officials said they are not alarmed, given the small amount that makes up auction-rate debt in Connecticut's portfolio and the low maximum reset rates the state has.
Connecticut has experienced daily auction failures since Feb. 14 in a portion of its auction-rate securities. The state has $121 million of clean water auction-rate revenue bonds, and $55 million of those bonds reset daily. The other $66 million resets every 28 days.
The daily resets have reached the maximum reset interest rate each day since Feb. 14, and the 28-day resets failed for the first time last week, Nappier's office said. While the maximum rate is low - about 4.7%, or 150% of the London Interbank Offered Rate - the bonds were previously trading at a little over 3% prior to the auction-rate failures.
If the commission authorizes Nappier's office to refund up to $150 million of clean water revenue bonds, they will explore refunding the $121 million of auction-rate securities. Nappier's office said it is looking at a number of different options, including refunding to fixed rate, but no definitive decisions have been made.
The remaining $62.5 million of Connecticut's auction-rate bonds are taxable general obligation bonds. The treasurer's office does not need refunding authority for the GOs, and it is considering refunding those as well. The taxable auction-rate bonds, which reset every 35 days, have not yet failed, the treasurer's office said. They were scheduled to reset yesterday afternoon, though the results were not available at press time. These bonds have a higher maximum reset rate and can go to 200% of LIBOR, or 6.5%.
Nappier's office is also seeking authorization to sell up to $600 million of special tax obligation bonds for transportation infrastructure purposes. While the treasurer's office does not have a specific date scheduled for issuance of those bonds, it is looking to go to market before the end of the fiscal year on June 30.
Also on the Bond Commission agenda is a request from the Department of Environmental Protection for allocation of $156 million of revenue bond and $60 million of GO proceeds for the clean water fund. These funds are requested to provide loans and grants to various municipalities or public water systems to assist with clean water fund project costs.
The commission will also vote on the authorization and allocation of about $11.8 million of GOs for the Connecticut State University System. The proceeds of those bonds, if authorized, will be used for a variety of projects, including renovations and improvements to facilities, and construction and development of a new classroom and office facility.
Gov. M. Jodi Rell chairs the commission and sets the agenda for each meeting, which usually occurs once a month. Last month, the commission approved $3.64 billion of bonds, including $2 billion of pension obligation bonds for the teachers' retirement fund. Connecticut would like to close the POB deal by June 30, though no official issuance dates have yet been determined.
