State of Utah Retains AAA Bond Rating, Completes Historic Bond Sale
Sep. 24, 2010
SALT LAKE CITY - Utah Governor Gary R. Herbert and Treasurer Richard K. Ellis today announced the recent affirmation of the State's "AAA" bond rating and the completion of a landmark $1 billion general obligation bond sale, which secured record-low borrowing costs for the state.
"Utah has once again received the highest bond rating available, furthering the State's legacy of sterling ratings. This is a result of Utah's history of prudent fiscal management and conservative budgeting, and points to a bright economic future," the Governor said.
Governor Herbert and Treasurer Ellis traveled to New York City in late August to meet personally with representatives from the nation's top three bond rating agencies. As a result, each agency - Standard and Poor's, Moody's Investors Service and Fitch Ratings - affirmed the state's "AAA" bond rating, making Utah one of only eight states in the nation with the enviable rating.
The State's ratings have never dipped below AAA, and its longest standing rating (with Standard and Poor's) dates back to 1965.
"The rating reflects our view of Utah's young, well-educated workforce and diverse economy, with an unemployment rate that, although rising, remains lower than the national average," said Standard and Poor's credit analyst Misty Newland. "Further supporting the rating is our view of the state's continued good financial management, including proactive budget adjustments to maintain good financial reserves, and low debt burden with short maturity schedules."
On Thursday, the Utah Treasurer's Office completed a $1 billion general obligation bond sale, which was driven by favorable market conditions, historically low interest rates and a tightly coordinated finance team.
"I'm extremely pleased with the results. We saved taxpayers a lot of money with the low interest rates we achieved on the deal," Treasurer Ellis said.
The bond sale, coordinated with Zions Bank Public Finance, the state's financial advisor, and a group of underwriters led by J.P. Morgan and Goldman, Sachs & Co., carried a "true interest cost" of 2.078%. It is the lowest-cost long term borrowing the state has ever achieved, according to the Utah Treasurer.
The majority of bond proceeds, $992 million, will fund ongoing highway construction projects, including I-15 in Utah County and the Mountain View Corridor. The highway bonds are part of a $3.4 billion legislative authorization. Approximately $1.1 billion in unused highway authorizations remain.
In addition, just over $94 million of the proceeds will fund several building projects at the University of Utah and Utah State University.
"These investments in transportation infrastructure and higher education facilities are critical to our state's ongoing economic development," Governor Herbert said. "Getting these important projects completed at a time when both construction and borrowing costs are at such relative lows is a home run for Utah taxpayers. And just as important are the jobs, as thousands of Utahns will be put to work on these projects."
The State's use of taxable Build America Bonds for a portion of the deal ($622 million) was one of the keys to the low rates that were achieved. "Including these in the structure accounted for about $30 million in interest savings over the life of the bonds," Ellis said.