Connecticut, on cusp of reopening, plans $850 million sale

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Connecticut, which plans a partial reopening of businesses in the state on Wednesday, is scheduled to kick off the week with an $850 million sale of Series 2020A special tax obligation bonds.

The retail and institutional orders will be Monday and Tuesday, respectively.

This highway junction rebuilding project in Waterbury, shown in January, is among those being funded with proceeds of next week's bond sale.

Proceeds will fund transportation infrastructure projects. RBC Capital Markets is lead manager of 22 in the syndicate. Maturities for the serial bonds will run from 2021 to 2040, according to bond documents. Closing is scheduled for May 29.

Major capital projects to be funded with proceeds include the I-95 Gold Star Memorial Bridge connecting New London and Groton; 60 additional M8 rail cars to Metro-North Railroad’s New Haven Line fleet; and rehabilitation of a major highway junction in Waterbury.

S&P Global Ratings and Fitch Ratings rate the STO program A-plus, while Kroll Bond Rating Agency assigns it AA-plus, according to the Office of the State Treasurer. All three assign stable outlooks.

Connecticut is among the hardest-hit states in the coronavirus pandemic.

As of Thursday, COVID-19 has killed 3,219 people in Connecticut, according to the Department of Public Health, the seventh-highest toll among states.

Gov. Ned Lamont is planning a four-phase reopening of the state in its next response to the pandemic, starting Wednesday. The first phase of reopening will include restaurants with outdoor dining only; hair salons; malls; and offices where employees cannot work from home.

Lamont’s March 23 executive order closed non-essential businesses statewide. Later phases will include nail salons, tattoo parlors, massage therapists, gyms, sporting events and large gatherings.

The pandemic's fiscal hit to the state government is severe. The nonpartisan Office of Fiscal Analysis in its latest projections expects a general fund deficit of $958.5 million and a special transportation fund deficit of $99.7 million in fiscal 2020.

Across both funds, OFA revised revenue projections for taxes and other revenue categories downwards by $687.9 million from its previous estimate to reflect the ongoing impact of the pandemic.

Still, Lamont said, Connecticut is in better shape than some of its peers.

“A lot of our core industries kept going,” he told reporters at the state capitol on Wednesday. “These are core industries that do well in bad times as well as good, healthcare being one. Education, we’ll see, but right now education is still a good driver for us.

“Manufacturing, as you know, we never did close manufacturing and right now they are working at a pretty good throttle although [aerospace manufacturer] Pratt & Whitney because of commercial jet engines did have to furlough some people.”

Recent deposits to Connecticut’s rainy day fund, whose balance is roughly $2.5 billion, also provide some flexibility, Lamont added. “That didn’t put us in at the top of the heap put it did put us in the top 10.” How much contingency the state will have to use to balance its current-year budget is still an open question.

Connecticut entered the pandemic after years of budget strife and political division. Its high per-capita wealth metrics contrast with the financial struggles of its cities. Capital Hartford was on the verge of bankruptcy until the state agreed to make debt payments on its behalf two years ago.

An analysis by Moody's Investors Service ranked Connecticut's net tax supported debt highest among the states at $6,637 per capita.

“A lot of our core industries kept going,” Connecticut Gov. Ned Lamont said this week. “These are core industries that do well in bad times as well as good, healthcare being one.

"For a small place it's such a complex entity," said muni bond analyst Joseph Krist. "It's very difficult to do a quanititative analysis on Connecticut because it's so nuanced. Connecticut looks different depending on where you're standing."

Lamont on Tuesday fired the state’s health commissioner, Renée Coleman-Mitchell. “I wanted to make an organizational change,” was all he said that day at a New Britain press conference. Controversy over school vaccination data had marked Coleman-Mitchell’s tenure over the past year.

Her interim replacement is Deidre Gifford, commissioner of the state Department of Social Services.

Connecticut is paying Boston Consulting Group $2 million to advise on best practices. According to Lamont, the federal government is covering the cost as a COVID-related expense.

The firm is also working with several neighboring states who, along with Connecticut, are part of a reopening coalition.

Also in the coming week, Connecticut’s largest city, Bridgeport, expects to sell $38.3 million of Series 2020A general obligation bonds through negotiation on Wednesday. Siebert Williams Shank & Co. LLC is lead manager.

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