CHICAGO — Wisconsin is offering more than $500 million of general obligation paper in the coming weeks, starting with a $280 million new money issue selling Tuesday, followed by a $260 million refunding later in February.
The state's capital finance office will take competitive bids on the fixed-rate new money Tuesday, just ahead of Gov. Scott Walker's release later in the day of his proposed two-year budget.
The state is awaiting rating reports. While the non-partisan Legislative Fiscal Bureau has recently revised revenue estimates over the next two years, there have been no material changes since the last ratings reports.
The state received authority from its building commission to issue up $438 million of new money GOs at a recent meeting and so will return with a floating rate component, said David Erdman, assistant capital finance director.
"The sale is one of the state's typical two new money general obligation issues annually to finance projects," Erdman said. The bonds will feature an eight-year call. The state previously tried out a five-year call but did not see much demand for it in discussions with potential bidding firms.
The state has been reviewing refunding opportunities and decided to move on a $260 million GO refunding with its eye on pricing during the week of Feb. 16. The state opted to publish the offering statement on the refunding Friday so market participants knew of the impending sale ahead of the Tuesday issue and so officials could act quickly in response to any market changes, Erdman said.
The refunding includes bonds being advance- and current-refunded for savings that meet a state threshold.
Morgan Stanley will run the books with another five firms rounding out the underwriting syndicate. Foley & Lardner LLP is bond counsel and Lamont Financial Services Corp. is advising the state.
The state is looking at refunding candidates in transportation revenue bond program which would tap the up to $375 million of authority approved by the commission, Erdman said. Walker is expected to seek authorization for $1.3 billion in new money transportation borrowing to bolster transportation funding instead of pressing for a gasoline tax as some have pitched, according to a published report.
Walker will lay out a budget that must address a $648 million revenue gap. The state also faces $283 million of red ink in the current budget and will require action to cure that deficit before the start of the next fiscal biennium July 1. Walker has already announced plans to cut state higher education spending by $300 million.
Wisconsin closed out the last fiscal year with a $517 million balance and $279 million in its reserve account. The state last year anticipated a $1 billion budget surplus, prompting Walker and his fellow Republicans who control the Legislature to adopt $600 million of tax cuts.
Moody's Investors Service recently revised Wisconsin's outlook to positive, recognizing the state's improved liquidity position, a fully funded pension system that eases future budget pressures, and reductions in the state's longstanding negative fund balance based on generally accepted accounting principles.
"The state's ability to make progress toward structural budget balance and continued improvement in its fund balances will be important to future credit analysis," Moody's said.
The state's GOs are rated at the AA level by Fitch Ratings, Moody's, Standard & Poor's and more recently by Kroll Bond Rating Agency. The three other than Moody's assign stable outlooks.
