CHICAGO — Ohio will bring its first deal of the year to market next week, $174 million of general obligation bonds that will be used in part to finance the creation of high-paying technology jobs.

The rest of the proceeds will fund clean-coal grants and refund GO school bonds for interest-rate savings.

It is the first of three GO deals that the state has set for the next three months, officials said. In late February, Ohio will competitively sell $120 million of local government infrastructure GO bonds, and has set a tentative schedule of March or April for $300 million of higher education GOs.

Ahead of next week’s sale, all three rating agencies affirmed high double-A ratings on the state.

Analysts said Ohio’s economy has stabilized and revenues are on the rebound, though the state continues to face challenges from the ongoing deterioration of the manufacturing sector and its use of one-time measures to balance the current two-year budget. 

The finance team has set a retail order period for Jan. 9, with institutional pricing the next day. Ohio traditionally sees strong retail interest in its bonds — sometimes up to 40% — and retail buyers are expected to purchase around 25% of this issue, officials said.

PNC Capital Markets is the senior manager. Eight additional firms are on the team.

Squire, Sanders & Dempsey LLP is bond counsel, and Acacia Financial Group Inc. is financial advisor.

The Ohio Public Facilities Commission is the issuer.

The bonds are divided into three series. Of the $174 million, $92 million is new money.

Another $82 million of common schools GO bonds will be refinanced to achieve savings. The transaction will refund bonds due in 2016 through 2019 and 2022.

“Given that the refunded bonds are still a few years away from their call date, we expect strong savings on a net present-value basis,” said the state’s assistant debt manager, Larry Scurlock, who declined to offer how much money the state expects to save.

The new-money piece features $80 million of bonds that mature serially from 2012 through 2021. Proceeds will finance the Third Frontier Research and Development program, a popular 10-year technology jobs-creation program that voters have twice renewed with GO borrowing authorizations.

The deal will mark the seventh time Ohio has come to market with Third Frontier bonds.

Established in 2002, the program was originally financed with a $1.2 billion, 10-year bond authorization.

In May 2010, voters approved a renewal of the program that allows Ohio to issue an additional $700 million through fiscal 2016.

After the upcoming sale, the state will have $400 million of outstanding Third Frontier bonds, many of which are taxable.

Next week’s deal will likely mark the only time in 2012 the state brings tax-exempt Third Frontier bonds to market, though it might price a taxable issue later this year, according to Scurlock.

“We fund the program on a cash-flow basis,” he said. “We target fairly rapid spend-down of the proceeds.”

The program focuses on five high-tech areas, including biomedical, advanced materials, advanced energy, information technology, advanced propulsion, and instruments-controls-electronics.

Another $12 million of new money will be used for clean-coal projects through the Ohio Coal Research and Development Program. The bonds mature from 2013 through 2022. The program is one of the largest state-supported coal research programs in the country, and has financed more than 100 projects.

Proceeds from the $12 million will fund grants to research institutions and other institutions that are studying various clean-energy efforts.

The coal program was long part of the Ohio Air Quality Development Authority, one of the state’s oldest bond issuers that was set up in 1971 to help Ohio meet the standards of the federal Clean Air Act of 1970.

But as part of the state’s new two-year budget, Gov. John Kasich shifted the program into the Department of Development. The Public Facilities Commission will continue to issue coal-program bonds, as they are general obligations of the state.

Ohio is a frequent issuer, but comes to market with relatively small transactions. The state has $7.6 billion of GO debt outstanding and another $2.4 billion of appropriation-backed debt.

Rating analysts noted that the state has a history of responding quickly to offset budget shortfalls and, like other states, is enjoying an uptick in revenues and a decline in the unemployment rate. Year-to-date revenues are $714 million, or nearly 11%, above fiscal 2011 revenues, and expenses remain on track.

Moody’s Investors Service maintains a negative outlook on the state. Standard & Poor’s and Fitch Ratings both assign stable outlooks.

Standard & Poor’s and Fitch rate Ohio GO bonds AA-plus, while Moody’s rates them an equivalent Aa1. Challenging the state’s tentative recovery is the need to overcome years of reliance on one-time measures to balance the budget during the recession, analysts said.

The current $54 billion, 2012-2013 budget makes progress but still relies on roughly $1.5 billion of one-shots to achieve structural balance.

The measures include pushing off debt-service payments in 2012 and 2013 to save $440 million — restructurings that were completed last year — and the planned sale of several assets, notably a privatization of the state’s lucrative liquor distribution system.

Under the proposal, a newly created nonprofit entity dubbed JobsOhio would float $1.2 billion of 20-year, tax-exempt and taxable bonds to finance its purchase of the system. The deal could come this year.

The Kasich administration is eyeing several other privatizations, including a lease of the lottery and selling off its highway rest areas.

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