Connecticut’s sale of special tax obligation bonds for infrastructure improvements generated $173.4 million of retail orders, the highest level for any sale under the STO bonding program since its inception in 1984, state Treasurer Denise Nappier said.
“This financing will provide the capital necessary to support critical strategic transportation improvements across the state,” Nappier said of the $600 million sale that priced Oct 31.
Most of the retail orders were from Connecticut residents, Nappier said. Orders exceeded the bonds available, which allowed for a reduction of yields, according to Nappier. The overall cost on the 20-year bond sale was 3.67%.
Proceeds will fund transportation infrastructure improvements, including work on state highways and bridges. State officials will use much of the funding to leverage additional transportation aid.
The special tax obligation program is structured as the state’s funding source for the match requirement for transportation federal funding. The funding requirement can vary by program and project, but generally the rule is 80% federal money, 20% state match.
Moody’s Investors Service rated the bonds Aa3, while Standard & Poor’s and Fitch Ratings assigned AA ratings. All three issued stable outlooks and affirmed the credit ratings on all the outstanding senior-lien and second-lien bonds of the program.
Moody’s said its rating “incorporates the strong legal covenants, including a two times additional bonds test and a combined senior- and second-lien debt service reserve funded at maximum aggregate annual debt service; the diversified stream of pledged revenues with some sensitivity to economic fluctuations; and satisfactory debt service coverage.”
According to Moody’s, its rating also incorporates a close relationship between the general fund and the state transportation fund. “Any movement in the state rating may have credit implications for the STO bonds,” the rating company said.
Updike, Kelly & Spellacy PC, and Lewis & Munday PC were co-bond counsel for the sale.
Siebert Brandford Shank & Co. LLC led the underwriting team. Squire Sanders LLP and the Law Office of Joseph C. Reid PA were co-financial advisors.