DALLAS — Texas is preparing to issue $7.2 billion of tax and revenue anticipation notes to cover cash flows to school districts for the new fiscal year beginning Sept. 1.
This year's issue is the lowest in four years, down 27% from last year's $9.8 billion, 30% below the record $10.3 billion in 2011, and nearly matches the $7.8 billion 2010 tranche. The state issued $5.5 billion of Trans in 2009.
This year's competitive sale is scheduled for Aug. 27, with the notes to be issued Sept. 3 and maturing on Aug. 28, 2014.
The Trans carry top ratings from all three ratings agencies. The state's general obligation bond ratings are AA-plus from Standard & Poor's, and triple-A from Moody's Investors Service and Fitch Ratings. Outlooks are stable.
"These top ratings reflect the economic strength of Texas as we continue to add jobs and put out the welcome mat for businesses," said Texas Comptroller Susan Combs, whose office handles the annual transaction. "Wall Street recognizes the importance of the strong revenue growth and conservative budgeting principles we have in Texas."
The series 2013 notes represent approximately 8.8% of projected general revenues for fiscal 2014, a proportion significantly smaller than the state's note issuance in the past three fiscal years.
"We believe that the declining trend in the state's annual cash borrowing needs is a reflection of its strong economic and revenue performance, which we believe is likely to be maintained through the forecast period," S&P analyst Horacio Aldrete-Sanchez wrote in his report.
Combs' office projects a continued expansion of Texas' economy, including gross state product growth of 3.4% and an unemployment rate of approximately 6.1% in 2014.
"We believe that this is a relatively conservative forecast, given the most recent estimates by IHS Global Insight Inc., which forecast a 4.2 % increase in GSP and a 5.8% unemployment rate in 2014," Aldrete-Sanchez wrote.
This year's issue comes after a contentious legislative session that produced a $94.6 billion budget over two years and a proposed constitutional amendment to tap the state's projected $11.8 billion rainy-day fund for a $2 billion water bond program.
Texas Gov. Rick Perry signed the budget but called three special sessions dealing with redistricting, abortion restrictions and transportation funding. The final special session ended with passage of a $1.2 billion transportation funding plan that will require voter approval in 2014. The water bond plan goes before the voters this November.