SAN FRANCISCO — Washington Treasurer James McIntire announced a "Buy Washington Bonds" program Friday that will result in the state's first negotiated tax-exempt bond sale in decades.
The new program will give preference to retail investors before institutions as part of a $323 million general obligation bond deal slated for next week. The larger slice of the deal will be a competitive sale.
"The new Buy Washington Bonds program puts individuals investors in our state ahead of big banks to buy our bonds," McIntire said in a statement Friday.
Washington has sold all its tax-exempt bonds — including refundings, stadiums, and public-private partnerships — competitively since 1996, though it used negotiation to price taxable Build America Bonds in 2009 and 2010.
Former Treasurer Michael Murphy was a major proponent of competitive debt offerings.
The state will offer the bonds, which are backed by motor vehicle fuel taxes in addition to the state's GO pledge, in $5,000 denominations to retail investors starting Friday, three business days ahead of institutions, according to the preliminary official statement.
Unlike nearby California and Oregon, which already have programs to promote retail bond sales, Washington does not have an income tax and thus offers little financial incentive to in-state retail investors to buy local tax-exempt bonds.
"For retail investors, it is the idea of keeping the money in state rather than having it go out to Wall Street banks," said treasurer's office spokesman Chris McGann. "Our primary focus remains on the competitive sale directed to institutional investors."
McGann said there has been a lot of public demand for the retail sale. He said JPMorgan, the underwriter for the negotiated issue, helped develop the retail outreach.
The state is still deciding on the size of the tranche that will be allocated to retail investors, but both pieces of the deal will have terms from 2012 through 2041. Proceeds will be used to fund various transportation projects across the state, including construction on Interstates 5 and 90.
Moody's Investors Service rates the bonds Aa1, and Fitch Ratings and Standard & Poor's rate the credit an equivalent AA-plus.
On July 20, Washington will also sell $390 million of tax-exempt various purpose GOs and $27 million of taxable GO bonds in a competitive sale, also in $5,000 denominations.
The tax-exempt paper will have terms from 2014 to 2036 and the taxable debt will mature starting in 2012 to 2014.
The money from the various-purpose GO bonds will be used to fund various state capital projects, such as water supply development in the Columbia River Basin and university buildings.
Some states have had success pitching bonds to retail investors, which can improve price leverage with institutional investors.
California Treasurer Bill Lockyer has been working on promoting the state's retail bond sales. He launched an ongoing marketing campaign targeting retail investors, including newspaper and radio ads, and a website, www.BuyCaliforniaBonds.com.
State legislation has also been proposed to allow California to sell $25 bonds on the New York Stock Exchange. Currently, the state sells $1,000 bond denominations to retail investors.
