SAN DIEGO — California Treasurer Bill Lockyer said the state plans to sell $15.5 billion of long-term debt during this and the next fiscal year, continuing a trend of fewer deals.
Lockyer said California will likely issue around $10 billion of general obligation bonds and $5.5 billion of lease revenue bonds over the two-year period.
The state went to market this week with it first GO sale of the year, $2.52 billion of bonds split into mostly tax-exempt new money and refinancing.
On Friday the state quoted retail investors a preliminary yield of 4.58% for a 20-year maturity, 115 basis points over the Municipal Market Data triple-A index. In November 2010, California’s 20-year bonds priced at 5.28%, 126 basis points over the index. For a 30-year maturity, Friday’s preliminary yield is 4.80%, 110 basis points above MMD. That compares to 5.50% and a 114 basis-point spread to the MMD in November 2010, according to a statement by the treasurer’s office.
An October general obligation bond sale is also scheduled but Lockyer said the numbers are still up in the air. The state last sold GO bonds in November.
“We are going to be back in the market about every other week from now to Thanksgiving,” Lockyer said Friday addressing the Bond Buyer California Public Finance Conference.
California, typically the largest issuer in the country, has refrained from issuing any GO debt so far this year, bypassing its usual multibillion dollar spring sale as it revaluated financing needs in the face of a multibillion-dollar budget deficit.
Lockyer said President Obama’s proposed jobs plan, if approved, would curtail tax-exemption for municipal bonds and raise borrowing costs for states. California faces $2.7 billion to $7.7 billion in higher borrowing costs.
On Wednesday, the state also priced $430 million of revenue bonds for the California State University.
In October, Lockyer said the state will sell $450 million of lease revenue bonds and plans a smaller sale of around $300 million in November for various agencies.
Lockyer pointed to the potential 10-year blueprint for future bonds sales that could range from nothing to voters authorization of another $40 billion to pay for infrastructure needs that include high-speed rail and further education spending. The state currently has authorization for $37 billion of general obligation bonds and $12 billion of lease revenues for the 10-year period.
Lockyer also said the state will restructure its commercial paper program this fall as it renews letters of credit.
Working under a mandate from Gov. Jerry Brown to reduce the state’s “wall of debt,” his Department of Finance has been polling departments and agencies to find out how much cash from previous bond issues they have on hand to spend on projects, as an alternative to issuing new debt.
More than $11 billion of cash from bond sales has accumulated in department accounts, costing taxpayers more than $700 million a year in debt service for projects that have yet to be completed, according to the governor’s May Revise budget.
Last year, the state sold $4.5 billion of GO debt in the fall. It did not offer new-money GOs this past spring for the first time since at least 1988. Last year, the state issued $6 billion of GO debt in the first half of the year and $10.5 billion for all of 2010 — way down from 2009 when it set a municipal market record of $23 billion.
