The State Treasurer’s Office on Tuesday announced $19 million in debt service savings from the sale of $243 million in Grant Anticipation Revenue Vehicles refunding bonds.
This is the third refunding that State Treasurer Dale Folwell has undertaken in the last six weeks, bringing the total savings across the three sales to nearly $118 million, by selling about $1 billion in bond debt at a lower interest rate, reducing the cost of the debt as it is repaid over time.
The bonds were sold through the State and Local Government Finance Division with the approval of the North Carolina Council of State.
The most recent bonds provide financing for various transportation projects and the State Transportation Improvement Program.
“The refunding of the GARVEE bonds will allow additional resources to be available for important transportation projects across the state,” Folwell said. “The refunding of the general and limited obligation bonds will provide capital for the Solvency Reserve Fund. Legislation establishing the fund has already been passed by the N.C. House, and I expect approval soon by the N.C. Senate. Once it is passed, it will be the first step in reducing the state’s $50 billion in unfunded healthcare and pension liabilities.”
The first bonds were purchased by Citigroup Global Markets, Inc. at an interest rate of 1.39 percent, saving taxpayers $15 million in debt service costs, while the second set went to Goldman Sachs at an interest rate of 2.27 percent, saving North Carolina taxpayers $83.55 million in debt service costs.
It is unclear who purchased the latest bonds.
“We are very pleased with the refunding,” Folwell said of the previous bond refunds. “We were able to secure an interest rate well below the ‘AAA’ indices. The favorable rate reflects the fiscally conservative management of our state by the General Assembly. It is also the result of the taxes paid by the hard-working citizens and businesses that keep our credit quality so high. I’d also like to thank the bond purchasers and all those whose efforts contributed to this successful result.”
Folwell said that by reducing the cost of servicing this debt, the state will have more funds available for teachers, law enforcement, roads and other core functions of state government.
In more good financial news, last month all three major national bond rating agencies re-affirmed the state’s AAA bond rating.
North Carolina is one of only 12 states to earn the AAA bond rating by all three rating agencies.
“North Carolina’s unanimous AAA bond rating is a powerful endorsement of the Republican-led General Assembly’s smart spending strategies, record savings reserves and unyielding commitment to our state’s financial security this decade,” House Speaker Rep. Tim Moore (R-Cleveland) said. “As one of only 12 states to obtain a AAA bond rating by all three major agencies, North Carolina can save taxpayers tens of millions of dollars through lower interest rates, continue to attract rapid job growth, and safeguard our citizens with one of the most fiscally sound governments in the United States.”