Delaware plans to come to market with $225 million of general obligation bonds on Jan. 12, and Fitch Ratings gave the deal its AAA rating.
The bonds will be offered to retail buyers beginning Jan. 12 with the remainder to be sold competitively Jan. 14.
Fitch also affirms its AAA rating on the state’s $1.4 billion of outstanding GOs with a stable outlook.
“Delaware’s premier credit standing centers on its considerable economic and financial resources, as well as institutionalized protections designed to ensure surplus operations,” Fitch said in its report.
Delaware’s personal income per capita ranks 14th in the country at 104% of the national average, although recent personal income performance has been weak. The state’s unemployment levels are well below the U.S. average, at 5.4% in October, although, like the nation, the rate is markedly up in October 2007, when it was 3.5%.
Like most states, Delaware is facing lower-than-anticipated revenues. The Delaware Economic and Financial Advisory Council reviews revenue forecasts at least six times each fiscal year and the most recent forecast from mid-December shows the general fund revenue estimate for fiscal 2009 to be $3.2 billion, 3.9% below the prior year, and projected an additional 4.3% decline in fiscal 2010, Fitch said. The estimate assumes a 0.3% decline in personal income tax withholding revenue in fiscal 2009, a significant deterioration in expectations compared to the November 2008 forecast.
The December forecast projects a $109 million fiscal 2009 shortfall, assuming the budget reserve fund remains fully funded at 5%, Fitch said. Gov. Ruth Ann Minner has announced agency spending cuts and other measures to address the gap and is expected to present an executive budget by Jan. 15, which incorporates significant spending cuts to address a projected $560 million deficit in fiscal 2010.
Tax-supported debt is about $2.3 billion, or 6.6% of personal income, with about 44% of debt issued through the transportation authority, according to Fitch. This ratio remains well below the double-digit levels experienced in the state’s very weak fiscal period of the mid-1970s, reflecting steps taken to reduce its bonding for capital. But the state’s above-average debt burden is tempered by a rapid rate of amortization, with 78% of GO bonds due in 10 years.