SAN FRANCISCO — The state of California will go to market next month with its smallest revenue anticipation notes transaction in eight years, according to State Treasurer Bill Lockyer.
The treasurer announced Thursday that the state will conduct a $2.8 billion cash flow borrowing transaction for fiscal year 2014-15 on Sept. 10.
Until now, the lowest amount of cash flow notes the state has had to borrow was a $1.5 billion deal for fiscal year 2006-07.
The notes will be sold in a competitive bid, rather than in a negotiated offering, which is how the state's RANs have been sold since 1997.
"The smaller size reflects the state's improved budget and liquidity condition," Tom Dresslar, a spokesperson for Lockyer, said in an emailed statement. "Given the state's markedly stronger credit standing and the low interest rate environment, [State Treasurer's Office] officials determined a competitively bid sale will bring taxpayers lower interest rates than a negotiated transaction."
The state typically sells RANs each summer to ensure its cash flow position stays sufficiently strong during stretches of the fiscal year when the tax revenue stream slows.
Last year, California sold $5.5 billion of RANs in August at its lowest interest rates in more than four decades.
Yields on the deal ranged from 0.21% with a 2% coupon to 0.23% with a 2% coupon. The interest rates were the lowest yields in a regular RAN sale since at least 1971, according to the treasurer's office.
Since then, Moody's Investors Service has upgraded the state's credit rating to Aa3 from A1. Standard & Poor's and Fitch ratings both give the state an A rating.
In another sign of an improving financial profile, the state also ended the fiscal year with a positive cash balance in its general fund for the first time since 2007,
A positive cash balance means that the state had funds available to meet all of its payment obligations without needing to borrow externally or internally from more than 700 internal special funds and accounts.
However, cash flow borrowing is still planned to proceed as normal — but at a substantially lower amount than normal — next month.
