The West Virginia Economic Development Authority closed on the sale of $90.8 million of lease revenue refunding bonds that achieved a net present-value savings of $6.39 million over the remaining life of the bonds, officials said.
The sale resulted in an average annual savings of $490,000 over the next 13 years. The refunding bonds mature in 2024.
“We as a state have taken prudent steps that have resulted in significant monetary savings,” Gov. Earl Ray Tomblin said. “This shows us, in real numbers, that we have made the right decisions in managing taxpayer resources and putting our financial house in order.”
The original bonds were sold in 2002 to finance six correctional facilities.
The refunding bonds priced on July 13 to yield 0.68% with a 2% coupon in 2012, 2.74% with a 5% coupon in 2018, and 3.9% with a 4% coupon in 2023.
The deal was rated AA by Fitch Ratings, Aa2 by Moody’s Investors Service, and AA-minus by Standard & Poor’s.
With its rating, Fitch upgraded the state’s general obligation bonds to AA-plus from AA. The state’s EDA and School Building Authority bonds were upgraded to AA from AA-minus.
The upgrades “reflect the state’s strong financial management and sound reserve position and a commitment to disciplined efforts begun 17 years ago to address accumulated financial challenges,” said Fitch analyst Karen Krop. She cited “seriously” underfunded teachers’ pensions and workers’ compensation system, and said state debt levels are moderate though long-term liabilities remain high,.
In addition to applying annual operating surpluses to reducing long-term liabilities, the state has retained half of each year’s surplus in two rainy-day funds that had a combined balance of $657 million at the end of May.