DALLAS — Utah will likely decide on Aug. 20 whether to go forward with a $235 million advance refunding tentatively scheduled for Sept. 3.
"I don't know if this one's still in the money," said Utah Treasurer Richard K. Ellis. "It's not a deal that's definitely going to happen. It's just on the verge of making sense."
With solid ratings of triple-A from three ratings agencies, Utah's yields are close enough to Treasuries to make advance refunding opportunities rare.
"Over the last few weeks, Treasury rates have been falling," Ellis said. "That's working against us on the arbitrage and escrow."
Ten-year Treasury bonds have recently traded at 2.38% while the triple-A yield on 10-year munis has been 2.12%, according to Municipal Market Data.
Most recent estimates show the refunding of bonds issued in 2009 and 2011 would provide present-value savings of 3.3% or about $7 million.
Ellis said his office would likely decide Wednesday whether to post a notice of competitive sale of the bonds.
"A negotiated deal would give us a little more flexibility," he said. "If this were in the money, I would be more comfortable going competitive."
Jon Bronson, managing director at Zions Bank, is the state's financial advisor.
Utah keeps its borrowing costs low not only with its credit rating but by issuing short maturities of 10 years or less.
Ratings agencies have affirmed the Utah's triple-A rating, with analysts noting the state's proactive approach to dealing with the loss of $32 million through the federal sequester of funds that was imposed because Congress failed to produce budget adjustments. Approximately one-third of Utah's budget comes from federal funds.
Utah is one of the few states where state pensions are almost fully funded.
"Utah's tradition of strong fiscal and debt management have allowed it to navigate the recession and slow recovery, and prudently address the ongoing spending pressures it faces, including education, transportation, and healthcare," Moody's analyst Marcia J. Van Wagner wrote in her Aug. 18 report.
