Rhode Island plans $149M sale of capital development loan bonds

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Rhode Island comes to market Tuesday with a $149.4 million competitive sale of general obligation consolidated capital development loan of 2018 bonds.

The state will issue roughly $114.3 million of Series A tax-exempt bonds and $35.1 million of Series B taxable bonds. Public Resources Advisory Group is the financial advisor and Nixon Peabody LLP is bond counsel.

Maturities will run through 2028.

The bonds will finance various projects voters approved in referenda, including mass transit hub infrastructure, creative and cultural facilities, higher education facilities, affordable housing, port infrastructure and environmental and clean water projects.

Fitch Ratings and S&P Global Ratings rate the bonds AA, while Moody’s Investors Service rates them Aa2. All three assign stable outlooks.

Fitch based its rating on “conservative and prudent fiscal management” and a moderate long-term liability position, offset by below-average economic growth.

“The state's particularly deep recession and tepid recovery inform our assessment of Rhode Island's modest economic and revenue growth prospects,” said Fitch analyst Eric Kim.

Rhode Island maintains its rainy-day fund at a statutory level of 5% of revenues. “The state's budget outlook assumes structural gaps in future years that will require continued fiscal discipline,” said Kim.

Gov. Gina Raimondo’s fiscal 2019 executive budget would close a $204.1 million deficit through a combination of primarily recurring revenue and expense proposals. Her budget assumes a favorable U.S. Supreme Court ruling to allow sports gambling in several states, which would generate an estimated $23.5 million for Rhode Island.

Raimondo targets about $100 million in savings for Medicaid, and assumes $29 million through federal reauthorization of the Children’s Health Insurance Program, which occurred when President Trump signed the budget on Feb. 9.

Raimondo’s budget also includes other Medicaid changes, including rate reductions for managed-care organizations.

“Rhode Island's multiyear budget outlook shows challenges, but structural budgetary protections noted earlier mitigate associated risks,” said Kim.

Lawmakers must approve the budget by June 30.

State General Treasurer Seth Magaziner said his “back to basics” strategy for Rhode Island’s pension fund helped minimize losses during February's market swings.

While global stock markets posted a 4.07% loss that month, Rhode Island's pension fund dropped 2.64%. A traditional 60% stock to 40% bonds portfolio, he said, would have dropped 2.9% percent.

Year to year ending Feb. 28, he added, the fund returned 11.24% and ended with a market value of $8.39 billion. The fund, according to Magaziner, remains ahead of both its internal benchmark, which returned 11.22%, and a 60-40 portfolio, which would have returned 11.2% over that time.

Rhode Island, under Magaziner's initiative, exited seven hedge funds in 2017, reallocating $500 million into more traditional investments.

According to Magaziner's annual report, the state refunded $67 million in state debt in 2017, taking advantage of interest rates, and saved $7.2 million.

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Sell side Primary bond market State budgets Seth Magaziner Gina Raimondo State of Rhode Island Rhode Island