DALLAS — Facing more budget-balancing challenges in 2011, Colorado will issue $500 million of tax revenue anticipation notes Thursday to smooth cash flows in the coming year.
The notes are pricing competitively, with bids through the Parity system. Stifel, Nicolaus & Co. is the state's financial adviser.
Colorado has issued Trans every year since 1984, except for 1990-92 and 1998-99. This could have been the last year if voters had approved a November ballot proposal known as Amendment 61 to ban all state borrowing. Instead, the measure was decisively defeated along with two other debt-restricting measures.
The notes retained top marks from rating agencies. The deal comes on the heels of several state bond issues that were delayed until this month due to uncertainty about the ballot measures. The delay has forced Colorado to compete with a parade of other issuers seeking to complete deals before Dec. 31, when the Build America Bond program is scheduled to expire.
"The highest-quality note rating is based on the state's projected cash flows and an ample cash cushion from available borrowable resources from funds outside the general fund," Moody's Investors Service analyst Marcia Van Wagner said in conferring the MIG-1 rating.
Standard & Poor's rated the notes SP1-plus.
"The rating reflects our view of the state's strong 4.5 times cash coverage attributable to its projected other non-general fund internally borrowable resources," said Standard & Poor's analyst Matthew Reining.
After falling nearly 14% in fiscal 2009, Colorado's general fund revenue fell 4% in fiscal 2010. The most recent forecast calls for a 5% gain in 2011. Personal income, sales, and excise taxes are expected to grow as the economy recovers, analysts say.
In the most recent estimate in September, state officials anticipated a revenue shortfall of about $257 million during the 2011 fiscal year. The projected ending cash balance in June 2011, after repayment of the notes and payment of interest, is negative $502 million.
The General Assembly meeting in January is expected to tackle the budgetary shortfall under newly elected Democratic Gov. John Hickenlooper, previously mayor of Denver.
Standard & Poor's also issued a separate report affirming Colorado's AA issuer rating and its AA-minus rating on lease and appropriations debt. Rating factors include the state's history of making mid-year budget corrections, a very low debt burden, and good financial performance. Constitutional limits on tax rate increases and softness in revenue pose challenges, Reining said.
In their annual economic forecast, University of Colorado economists this week predicted the state will add about 10,100 jobs in 2011 after losing more than 140,000 jobs the past two years.
The projected job gains will not be enough to lower the unemployment rate, according to Richard Wobbekind of CU's Leeds School of Business. He expects job losses in the government, construction, manufacturing, and information sectors next year, but said other sectors should grow.
Colorado had a seasonally adjusted jobless rate of 8.4% in October and a 7.5% rate for the same month a year ago. The U.S. rate in October was 9.6%.
