Massachusetts will come to market Wednesday with its first borrowing of fiscal 2014, a $600 million competitive sale of general obligation Series E bonds.
The sale will include $80 million of bonds from 2023 to 2026, while the long borrowing will feature $520 million of borrowing from 2032 to 2043. State treasury officials are structuring the bonds with an eight-year call.
Massachusetts expects to issue $3.2 billion in bonds in this fiscal year to support the commonwealth's capital budget. Of that amount, about $2.5 billion would be in GO bonds.
An October sale of $680 million is planned for the accelerated bridge program, based on the preliminary capital expenditure schedule for that program that the state's Department of Transportation provided. Massachusetts could issue them as commonwealth transportation fund revenue bonds or federal highway grant anticipation notes, or both.
According to state Treasurer Steven Grossman's office, net bond proceeds received, not par amount, will determine the actual amount of borrowing.
Gov. Deval Patrick signed the $34.1 billion fiscal 2014 budget into law on July 12. One-time resources include a $350 million withdrawal from the stabilization, or rainy-day fund, although the net withdrawal from that fund was $207 million after accounting for projected deposits of capital gain revenues and tax settlements.
Grossman's office projects the fiscal 2014 rainy-day balance at just under $1.4 billion, putting the commonwealth third nationally by absolute size, according to a National Association of State Budget Officers survey published in June.
Last week, state lawmakers overrode Patrick's veto of a $500 million transportation funding bill that will raise the gasoline tax by 3 cents per gallon.
Patrick said the bill did not reflect an expected revenue shortfall should state officials remove tolls from most of the Massachusetts Turnpike in 2017.
Moody's Investors Service rates the GO bonds Aa1, while Fitch Ratings and Standard & Poor's assign AA-plus ratings.
Fitch, in a report it issued late Monday, said its rating of Massachusetts "reflects considerable economic resources and a record of prudent management." Offsetting its credit strengths, said Fitch, is a debt level it expects to remain high.
Massachusetts is more active with local aid than many other states, said Fitch. "In addition, the commonwealth is responsible for the pension benefits of not only commonwealth employees but also teachers statewide, contributing to a combined burden of debt and pension that is also well above the median for U.S. states rated by Fitch," the rating company added.
According to Morningstar Municipal Research analyst Rachel Barkley, tax revenue and federal funding combined account for more than 90% of the state's total revenue.
"As is common for states with a high dependency on an income tax, state revenue has the potential to fluctuate rapidly with economic cycles, as seen during the recession," Barkley wrote in a report. "However, the effects of the recession were less severe in Massachusetts with a relatively rapid recovery."
Edwards Wildman Palmer LLP is bond counsel. Mintz, Levin, Cohn, Glovsky, and Popeo PC is disclosure counsel. Public Resources Advisory Group is the financial advisor.
Treasury officials, who held an investor call last Friday, have scheduled the next call for Sept. 16, one week after its next disclosure update.
