CHICAGO Minnesota will wrap up its new-money general obligation borrowing for the year in a sale Tuesday of up to $767.6 million that includes a refunding piece, before shifting gears to financing the new Minnesota Vikings professional football stadium.
The state will take competitive bids on three series of bonds including $282.6 million of GO various purpose paper, $112 million of GO state trunk highway bonds repaid with transportation-related revenues, and up to $373 million of GO various purpose refunding bonds.
Each series will be awarded separately. The new money matures serially through 2033 and the refunding tranche matures serially between 2016 and 2026. The state reserves the right to cancel or postpone the issue.
Public Resources Advisory Group is advising the state and Kutak Rock LLP is bond counsel. Fitch Ratings affirmed the state’s AA-plus GO rating and stable outook Tuesday. Moody’s Investors Service and Standard & Poor’s affirmed the state’s GO rating over the summer. At that time, Moody’s revised the state’s outlook to stable from negative. Standard & Poor’s assigned a stable outlook. The state has $5.5 billion of GO debt and supports another $1.1 billion of debt with various appropriation credits.
New-money proceeds will fund projects included in the state’s recent capital budgets known locally as bonding bills. The state broke its new money borrowing for the year into two tranches, including one that sold over the summer as it sought to limit the size based on market conditions at the time, said Kristin Hanson, assistant commissioner for treasury in the Minnesota Management and Budget office.
While Congress was moving closer to passage of legislation Wednesday that would end the government shutdown and avert a debt default, Hanson said any market disruption that might deter the state from entering the market would not interrupt project funding. “We have enough cash available to fund projects,” she said.
In a sign of the state’s improved revenue picture, Minnesota closed fiscal 2013 with a $636 million surplus that will help repay school district aid withheld to deal with a prior budget deficit, according to budget results. The state will still owe districts about $200 million of the $2.8 billion in state aid withheld to help balance the state’s fiscal 2012-2013 biennial budget.
Higher-than-anticipated year-end revenues, combined with gains in transfers and other resources along with lower spending, produced the $636 million balance. Under state law, the entire balance automatically goes to repay a portion of the estimated $874 million in aid still owed to public school districts.
The promise of new revenue from a tax package approved this spring in the new $38.3 billion two-year budget further enhances the state’s fiscal position. A new personal income tax bracket with a rate of 9.85%, up from 7.85%, is projected to raise $1.1 billion during the fiscal 2014/2015 biennium. Corporate tax changes and the tobacco tax hike will generate another $850 million. The new revenue will wipe out a $627 million deficit, fund property tax relief, and pay for more spending on education and economic development.
Once the state wraps up the GO sale, attention will shift to the Vikings issue. The state expects to announce by Monday its picks for the finance team. The state received a total of 22 responses to a request for proposals earlier this month from firms interested in the deal.
The state is authorized to sell up to $600 million of general fund appropriation bonds to cover the public’s $500 million tab for the new $975 million Vikings stadium. The state is on the hook to repay $350 million and Minneapolis the other $150 million. A portion of the authorization is expected to be issued as soon as this year once the team finalizes its financial contribution.
Public Financial Management Inc. is financial advisor and Kutak Rock is bond counsel. The underwriting pools would remain in place through June 2017.
The RFP provides some insights into the state’s preliminary thinking so far about the borrowing and structure. The state contemplates tapping the authorization in more than one market outing over the next two years. Each transaction may include tax-exempt and/or taxable bonds and may be sold on a competitive or negotiated basis.
The state carries appropriation-backed ratings of AA from Fitch Ratings and Standard & Poor’s. The 65,000-seat stadium is expected to be completed for the 2016 season. It’s being built adjacent to the team’s current home, the 31-year-old Hubert H. Humphrey Metrodome.
