Deal: AAA rating yields historically low rates
Gov. Nathan Deal announced today that Georgia has once again received triple-A bond ratings from all three major municipal bond rating agencies. The rating helped to secure low borrowing costs in the state’s largest-ever competitive offering of $997 million.
Georgia is one of just eight states – the others are Delaware, Iowa, Maryland, Missouri, North Carolina, Utah and Virginia -- with the coveted triple-A ratings from all three rating agencies.
Moody’s, Standard & Poor’s and Fitch all have assigned the top bond ratings with stable outlook to the state, with individual ratings being Aaa, AAA and AAA, respectively. A triple-A rating is the highest rating available to a bond issuer.
“This rating is a reflection of the state’s commitment to sound fiscal management,” said Deal. “Retention of the top bond ratings allows the state of Georgia to continue to save millions of taxpayer dollars because of the low interest rates we are able to secure.”
The bond ratings came in advance of the Georgia State Financing and Investment Commission’s approval on Tuesday of the competitive sale of $556 million of general obligation bonds. The bonds include three series of tax-exempt debt for new capital projects totaling $479 million and $77 million of federally taxable Qualified School Construction Bonds.
The state was able to lock in an all-in true interest cost of 0.93 percent for 5-year bonds, 1.97 percent for 10-year bonds and 3.44 percent for 20-year bonds. The QSC Bonds were sold with an interest rate of 3.96 percent; the federal government provides a 100 percent interest rate subsidy on these bonds.
Capital projects being funded through the series 2011A, 2011B and 2011C bonds include new equipment for law enforcement agencies, a new library at Armstrong Atlantic State University, a biology building at Georgia Southern University, a health and human sciences building at Georgia Southwestern University, a new classroom building at Altamaha Technical College’s Brunswick campus and repairs and renovations to many of the state’s university and college campuses.
The series 2011 D Qualified School Construction Bonds will finance projects for county and independent school systems and state schools through the Department of Education.
Additionally, the state was able to refinance outstanding debt at lower rates, saving the state $16 million in Fiscal Year 2012 and $2.9 million in Fiscal Year 2013. The state also converted $125 million in 2006 variable rate bonds to fixed rate bonds. The balance of outstanding 2006 variable rate bonds, roughly $127 million, will be converted to floating rate notes.
The Bond Ratings
“The highest-quality rating is supported by Georgia’s conservative fiscal management, moderate debt burden and relatively well-funded pensions,” reported Moody’s. The investors services company reported that the state’s credit strengths included conservative fiscal management, prompt responses to revenue declines and rapid reserve building after the 2001 recession.
Fitch recognized Georgia’s long history of timely action to address fiscal imbalance. “Despite severe economic weakness during the recession, the state’s economy has grown rapidly and diversified over time. … The longstanding ‘AAA’ rating and Stable Outlook on the state’s GO bonds reflect its conservative debt management, a proven willingness and ability to support fiscal balance and a diversified economy,” the report explained.
Georgia’s well-diversified economy remains well positioned to recover from the current recession, reported Standard and Poor’s. “Georgia has what we view as a well-diversified economy with a growing education and health sector, a healthy aerospace and defense industry and a healthy trade and transportation sector, anchored by Atlanta Hartsfield-Jackson Airport (the world’s busiest) and the port of Savannah (the fourth busiest in the nation and the fastest growing),” explained S&P.