DALLAS -- Ohio plans to price $288 million of high-grade general obligation bonds next week in a sale that will raise $112 million to fund the state's coal research program and its technology-based economic development program.
The remainder of the deal being competitively bid Tuesday will refund outstanding debt for savings, adding to the crowded calendar of borrowers with planned refundings.
Ahead of the sale, Fitch Ratings and Standard & Poor's affirmed their AA-plus ratings and Moody's Investors Service affirmed its equivalent Aa1 rating on the upcoming financing and $8.5 billion of debt. All assign a stable outlook.
"The stable outlook reflects our view of the state's improved structural budget alignment and steady economic growth, which has increased revenue and allowed for contributions to the BSF," said Standard & Poor's analyst Eden Perry.
The sale is being offered in five series. A $12 million tax-exempt coal development GO series will finance grants and loans for the research and development of coal technology that encourages the use of Ohio coal, to any individual, association, or corporation doing business in the state or to any educational or scientific institution located there. The bonds carry a final maturity in 2026.
The grants and loans are issued via the state's coal development program, one of the largest state-supported coal research and development programs in the nation. The state has funded nearly 400 projects as of year-end 2015 through the coal program. The program can have no more than $100 million of bonds outstanding at any one time.
Ohio's $100 million Third Frontier Series of taxable bonds will finance research and development projects geared toward the state's high technology industry, commerce and business sectors. The bonds also mature in 10 years.
The Third Frontier program, established in Feb 2002, was originally intended to provide $1.6 billion in funding over a ten-year period through fiscal year 2012. In May 2010 voters approved the renewal of the program authorizing $700 million in funding. Of the total state funding, $1.2 billion will come from the issuance of Third Frontier Research and Development General Obligation Bonds. The program has provided investment capital to more than 1200 companies.
The state also plans to refund $176 million of outstanding GOs in three series for debt service savings, according to John Charlton, communications director for Ohio's office of budget and management.
Peck, Shaffer & Williams is bond counsel and Acacia Financial Group is the financial adviser on the sale.
Ohio's GO rating is supported by the state's strong and proactive financial management, including timely response to budget shortfalls and moderate, affordable debt, pension and other post-employment benefit liabilities, according to Moody's.
The state's 2016-2017 biennial budget was enacted in late June 2015, with fiscal 2016 state tax receipts estimated at $22.2 billion, 3.5% above fiscal 2015 actuals. The enacted budget anticipates positive revenue growth despite the enacted tax reforms. Fiscal 2016 preliminary year-to-date tax revenues through January 2016 totaled $13.1 billion, virtually matching current year estimates and 5.4% above prior year levels.
The state expects increases in general revenue fund appropriations of 13.1% and 4.2%, respectively, over the next two fiscal years.
The state has $8.5 billion of outstanding GOs bonds when highway capital improvement bonds are included, and $1.6 billion of appropriation-backed bonds rated one notch lower, Fitch said. The highway bonds are also secured by a pledge and paid from highway user receipts, including the motor vehicle fuel tax.