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New York Puts Off PIT Sale

New York State’s late budget has delayed a $1.3 billion personal income tax bond deal that was expected to come to market this month.

“We are awaiting passage of the budget, which will result in additional disclosure to the market,” said Susan Barnett, spokeswoman for the Dormitory Authority of the State of New York, which will issue the bonds. She added that the sale date had not yet been rescheduled.

Lawmakers were expected to pass an extender bill last night to avert a government shutdown as the state passed its 75th day without a budget. 

The deal had been tentatively scheduled for next week, according to the state comptroller’s ­forward issuance calendar released in April. When DASNY announced minority-owned firm M.R. Beal & Co. would serve as book-running senior manager on the deal, the expectation was that the debt would still price this month, though a date had not been set.

The Division of Budget’s online calendar shows the deal pricing in July.

“The state’s got a lot of things on their plate,” said Jacob Alpert, executive vice president and manager of M.R. Beal’s municipal bond department. “It’s the environment we’re in — from the federal government on down, everybody’s facing the same budget constraints and the same holes in their budget. It’s part and parcel to the immediate world we’re in.”

The deal will be comprised of taxable Build America Bonds and tax-exempt new-money and refunding bonds.

According to data compiled by Newsday, the state has only passed an on-time budget twice in the past 25 years. The latest budget during that time was the one for fiscal 2005, which was enacted 133 days after the beginning of the fiscal year.

“Late budgets are the norm rather than the exception for New York State,” said Fitch Ratings analyst Laura Porter. “Obviously it’s not ideal, and it’s not something that can go on indefinitely.”

Fitch factored in New York’s trend of passing tardy budgets and closing gaps with one-shots rather than long-term recurring solutions when rating the state’s general obligation debt and PIT debt AA with a stable outlook.

“The historical budgeting behavior in general is largely the reason why New York State is a below-average rating for a state,” Porter said. “If you look at the economy and the debt levels, the thing that is below average for a state would be the budgeting history.”

One piece of the budget that lawmakers did pass on time was debt-service appropriations. The state has sold bonds in the absence of a completed budget, competitively selling $800 million of BABs on May 26. Spreads to Treasuries in that deal widened compared to a March 5 PIT deal from the Dormitory Authority.

In the March deal, a 20-year maturity BAB priced at 5.65%, 116 basis points above 20-year Treasury average yields on that day. Last month’s deal saw a 20-year maturity priced at 5.5%, which was 156 basis points above 20-year Treasuries. The change is partially due to widening spreads overall in response to the European debt crisis.

At press time, the Legislature appeared poised to pass an emergency spending bill to prevent a government shutdown. The threat appeared real last week when lawmakers balked at Gov. David Paterson’s plan to include budget cuts in his extender bill as he had last week. The Legislature cannot amend extender bills, it can only approve them.

Early yesterday minority Republicans said they would pass the extender bill to prevent a shutdown as long as it didn’t raise taxes, include new fees or borrowing.

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