In a rare move, Florida Cabinet approves billions of new debt

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Florida's elected Cabinet has authorized seven bond issues that combined represent one of the largest amounts of new debt approved by the panel at one time.

The Cabinet at its last meeting of the year Tuesday unanimously granted requests to issue more than $2.06 billion of bonds made by Division of Bond Finance Director Ben Watkins and State Board of Administration Executive Director Ash Williams.

Watkins requested the largest single amount, $1.5 billion of Department of Transportation federal highway reimbursement revenue bonds, also known as indirect grant anticipation revenue vehicle bonds.

“We've really been fortunate to be the beneficiary of extremely favorable market conditions,” said Florida Bond Director Ben Watkins.

"That's for the purpose of validation only," he said. "The second part of that is authorizing the sale of $152 million of that $1.5 billion."

Watkins said he would return to the Cabinet for authorization to issue the remaining $1.35 billion.

Members of the Cabinet, Gov. Ron DeSantis, Chief Financial Officer Jimmy Patronis, Attorney General Ashley Moody and Commissioner of Agriculture Nikki Fried, didn't question the request.

Watkins also received approval to issue $54.1 million of Florida International University dormitory revenue refunding bonds; $17.5 million of Florida State University dormitory refunding bonds; $20 million of FSU mandatory student fee refunding bonds; and $12 million of FSU parking facility refunding bonds.

Williams' largest request was for $450 million of Florida Housing Finance Corp. homeowner mortgage revenue bonds, to be issued in multiple series.

The Cabinet also approved Williams' request for the FHFC to issue $12 million of multifamily mortgage revenue bonds for the Jackson Forest project in Leon County.

A report on the low interest rate obtained in an October refunding stunned Patronis.

Watkins said $397.4 million of full faith and credit State Board of Education taxable public education capital outlay refunding bonds sold with a true interest cost of 0.47% compared with the average interest rate on the underlying bonds, which were issued with a TIC of 4.78%.

The refunding will generate present value savings of $50.6 million, or 13.1% of the principal amount being refunded, Watkins said. Wells Fargo Bank NA submitted the winning bid.

"Good job, $50 million in one lick," Patronis said about the savings. "I'm just kind of scratching my head."

Watkins said his division expects to issue several deals before the end of the year, and will be ready to sell more debt "when the first of the year rolls around."

The municipal market can best be described as a "Goldilocks market," he told the Cabinet. "We're enjoying extremely low interest rates because of federal monetary policy.

"We've got strong demand for municipal bonds and a really limited supply," Watkins added. "So we've really been fortunate to be the beneficiary of extremely favorable market conditions."

This year, Watkins said his division sold $1.1 billion of refunding bonds, generating $275 million in savings.

Over the last decade, the Division of Bond Finance has refunded over 85% of the state's outstanding debt, reducing the cost of borrowing money.

"We are coming to the point now where [refunding] candidates are diminished," said Watkins. "We've got $275 million to $300 million of loans outstanding that we're constantly monitoring to lower the rates when that makes sense to do."

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Primary bond market General obligation bonds Revenue bonds Ben Watkins State of Florida Florida
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