CHICAGO — Wisconsin will take competitive bids Tuesday on $212 million of new-money general obligation bonds as it tees up two revenue bond refundings to take advantage of the rise in bond prices.
The GO sale will provide funds for statewide land, water, property, highways, buildings and equipment projects with a public purpose. Foley & Lardner LLP is bond counsel. The bonds carry a final maturity in 2042.
The state typically limits its GOs to 20 years, but had a substantial number of projects that better fit a 30-year financing schedule “based on the nature of the project and source of funds,” said capital finance director Frank Hoadley. Though the bonds carry a full-faith-and-credit pledge, user fees repay some of the debt.
Wisconsin’s $7.5 billion of outstanding GOs have mid-double-A ratings and a stable outlook. The sale’s offering statement includes updated financial information to reflect the release earlier this month of tax collection figures from the Department of Revenue.
The new figures cover collections through April and projections of general fund taxes for the remainder of biennium that runs through June 30, 2013. The state expects to collect $13.4 billion in the current fiscal year, up $194 million from a February estimate from the Legislative Fiscal Bureau. That is up by $476 million over the last fiscal year. The state projects collecting $13.7 billion in the next year, up by $72 million over the February forecast.
With the increased tax collections and budget relief from a structural refunding that pushed off near-term maturities and other refundings, Wisconsin anticipates an ending balance on June 30 of $230 million and a balance in fiscal 2013 of $89 million.
The deals come as political attention in the state is focused on a historic recall election targeting first-term Gov. Scott Walker, a Republican, with the state’s fiscal and economic condition playing a key role in the debate. Walker faces Democratic Milwaukee Mayor Tom Barrett in the June 5 race.
Democrats and union leaders led a petition drive against Walker last year to force the recall following his successful legislative move to curtail most collective bargaining rights for most public employees.
Walker’s 2012-2013 budget sharply reduced the use of non-recurring revenues favored by his Republican and Democratic predecessors. About $337 million of debt restructuring helped eliminate a $3 billion shortfall in the state’s $66 billion two-year budget adopted last year. Walker primarily eliminated the red ink with cuts. It put the state on a more solid financial footing, though Barrett and other critics contend the improvement has come at the expense of local governments, school districts and public employees, the latter of which face higher pension contributions and health care premiums.
Wisconsin’s rating reflects a moderate debt level with a fully funded pension system, a broad and diverse economy, progress on its structural imbalance and minimal reserves, Fitch Ratings wrote in a recent report.
Moody’s Investors Service said other factors in the state’s favor include an improving liquidity position, timely financial reporting, and robust disclosure, though it is challenged by the ongoing structural imbalance.
As soon as this week, the state may sell between $100 million and $200 million of transportation revenue refunding bonds with Bank of America Merrill Lynch managing. Acacia Financial Group Inc. is the adviser and Quarles & Brady LLP is bond counsel.
The deal follows a new-money transportation sale in April. “The surge in bond prices” put Hoadley’s office “back to work,” he said, as the state began to see savings on various maturities ripe for an advance refunding.
The bonds have a first claim on vehicle registration fees and other vehicle registration-related fees.
The state’s transportation bonds have double-A ratings that benefit from a long and stable trend of pledged revenues and a conservative structure, though they are challenged by a narrow source of revenues. Debt service coverage is projected to remain at 2.86 times in 2013.
The state also anticipates entering the market as soon as next week with a new-money and refunding deal of between $100 million and $200 million of clean-water revenue bonds, Hoadley said. About $40 million represents new money.
JPMorgan is the book-runner. Public Financial Management Inc. is the adviser.
The water bonds are also rated in the double-A category.
