CHICAGO — Ohio will take bids on $75 million of general obligation bonds Wednesday in the state’s first competitive sale since the 2008 market crash.
Proceeds from the double-A rated bonds will finance a popular technology jobs program called Third Frontier Research and Development.
The competitive sale marks a return to Ohio’s pre-2008 tradition of selling about one-third of its bonds competitively and two-thirds in negotiated sales.
“We haven’t done a competitive sale since the economic crisis, and now that the market has stabilized we’re back to competitive sales,” said Larry Scurlock, the state’s assistant debt manager. “One of the best advantages for us is to get a baseline of where the state of Ohio’s bonds trade in the primary market.”
The borrowing is tentatively divided into two issues, a tax-exempt piece for $23.3 million and $51.6 million of taxable Build America Bonds.
The tax-exempt series matures in 2012, 2013, and 2014. The BABs mature from 2015 through 2020.
The Ohio Public Facilities Commission is the issuer. Public Financial Management Inc. is financial adviser. Bond counsel is Thomson Hine LLP.
Moody’s Investors Service affirmed its Aa1 rating and negative outlook on the state’s GO debt ahead of the sale.
Standard & Poor’s and Fitch Ratings maintain AA-plus ratings on Ohio.
Analysts praise the state for conservative fiscal management and a moderate, rapidly amortizing debt burden.
However, Ohio has been hit particularly hard by the recent recession and decade-long deterioration of its manufacturing base.
To offset falling revenues since 2009, the Buckeye State has depleted its rainy-day fund and relied on an increasing amount of one-time revenue measures to balance its budget, analysts said.
Ohio launched the $1.6 billion Third Frontier in 2002 with the aim of expanding the state’s high-tech research industry and attracting technology-focused start-up companies.
The program is supported by $1.2 billion of GO bonds.
Voters approved $500 million of debt for the program in 2005 and another $700 million last May.
Other revenue sources include general fund money and proceeds from the sale of higher education GO bonds.
This is the first time the state has headed to market with Third Frontier bonds since last May’s authorization.
So far, Ohio has sold $255.7 million of the $1.2 billion for the program.
The May ballot measure allows the state to issue up to $450 million of GOs through 2011, $225 million in 2012, and no more than $175 million each year after that. The measure also requires independent oversight of the proposed projects.
With 62% of voters supporting the measure, the $700 million bond request won after months of promotion by numerous business groups, newspaper editorial boards, and Democratic politicians, including Gov. Ted Strickland.
