CHICAGO – Missouri heads into the market next week with $100 million of its high-grade paper to finance state and public university building projects.
The state will take competitive bids on the bonds Tuesday through the state's Board of Public Buildings. Columbia Capital Management LLC in advising the state. Gilmore & Bell PC and Fields & Brown LLC are co-bond counsel. Kutak Rock LLP and the Hardwick Law Firm LLC are co-disclosure counsel.
About $38 million of the sale will help pay for ongoing work at the state capitol building with $36 million going toward other state facilities and $26 financing university building projects.
Ahead of the sale, all three rating agencies affirmed the state's top credit marks on its general obligation bonds and the AA-plus/Aa1 ratings on the upcoming sale and most of the state's other appropriation-backed special obligation bonds.
"The rating reflects our view of Missouri's general creditworthiness, the state's demonstrated commitment to repaying its appropriations-backed obligations, and the importance of appropriation debt to Missouri's overall capital bonding structure," said Standard & Poor's analyst Nora Wittstruck.
Moody's Investors Service said the state's top rating is supported by its history of above-average reserve levels, solid fiscal management controls, and a moderate debt and pension burden. The state maintains a reserve equal to at least 7.5% of net general revenues.
"The stable outlook also reflects the expectation that, with its history of conservative fiscal management, the state is positioned to balance gradual income tax reductions over the next several years," Moody's added. Lawmakers approved the phasing in of a $620 million income tax cut but revenue growth must meet a revenue growth target to take effect.
Missouri's income tax accounts for nearly two-thirds of general fund revenues with the sales tax following as the second key revenue stream. "Sharp declines during the recession offset strong gains in the years leading into it. Since then, revenue growth has generally been slow," Fitch Ratings wrote.
Fitch considers the state's debt and unfunded pension burden – totaling a combined $10 billion – as manageable at just 4.1% of 2014 personal income compared to the 50-state median of 5.8%.
The Republican-controlled Legislature recently sent Gov. Jay Nixon, a Democrat, a $27 billion fiscal 2017 budget that anticipates 4% revenue growth. The legislature's version doesn't veer much from Nixon's proposal.
The plan provides about $70 million in additional public school funding, but it falls about $15 million short of what Nixon proposed and despite multi-year increases state funding remains $400 million to $500 million below a previously set foundation formula.
The budget also raises by about $70 million higher education funding allowing for a tuition freeze.
"In the coming days, we will review the budget line by line to ensure we keep the budget in balance, our AAA rating intact and our economy moving forward," Nixon said in a statement.
Still left for lawmakers to tackle is a proposed constitutional amendment asking voters to raise the state's 17-cent-per-gallon gasoline tax by 5.9 cents.
The Senate recently approved sending the question to voters in November but a House vote awaits and its fate there is uncertain.
The tax would generate about $165 million for the cash-starved Missouri Highways and Transportation Commission and $71 million for local road projects. Transportation officials have warned that they barely have enough money for upkeep on the road system's 34,000 miles of highway and the 10,400 bridges.
The budget includes the full $12 million appropriation covering the state's commitment to the stadium built for the now-departed St. Louis Rams stadium.
The House initially stripped the appropriation from the budget, raising market concerns over the strength of the political commitment to continue paying off bonds backed by appropriation after Rams owner Stan Kroenke won approval to relocate the NFL team to the Los Angeles area.
The dome was built in 1995 to lure the Los Angeles Rams to St. Louis. It was financed with the help of $256 million of 30-year appropriation backed bonds issued by the St. Louis Regional Convention & Sport Complex Authority in 1991. About $144 million remains outstanding.
