Governor Chafee announced today the Rhode Island Health and Educational Building Corporation (RIHEBC) has been able to sell a $15 million tax-exempt bond issue on behalf of the City of East Providence for critical health and safety repairs for its public schools. The bonds are rated Aa3 by Moody's based on the Programmatic Rating of the State School Construction Aid Intercept.
The bonds were sold to Raymond James Morgan Keegan at a True Interest Cost (TIC) of 3.51%. This rate is significantly below the rate that would have been possible based on the City's current rating of Ba1. FirstSouthwest, Financial Advisor to RIHEBC, and East Providence projected that the lower interest cost will result in savings to the City of approximately $150,000 each year and similar annual savings to the State. Total interest is more than $5 million lower than was projected prior to the RIHEBC Programmatic Rating, according to Maureen Gurghigian, Managing Director at FirstSouthwest.
Governor Chafee said, "I am very pleased that City of East Providence received such favorable pricing for this important project and I am grateful to the RIHEBC, our Department of Revenue, and the entire financing team for their efforts on this successful financing."
Rosemary Booth Gallogly, Director or Revenue, added, "The financing of this project has been a priority for the State since we appointed the Budget Commission last December. The savings far exceed our projections which will greatly assist East Providence with implementation of its five year budget plan."
Gallogly noted that Moody's Programmatic Rating for RIHEBC is based upon the State's own General Obligation Rating due to the Intercept Program's characteristics. In their rating report, Moody's cited "strong state oversight of school budgeting and debt issuance, the program's support of highly essential public schooling and strong program mechanics" and noted that the Program is structured to ensure strong coverage of debt service and timely payment to bond holders.
RIHEBC has been issuing bonds for public school projects since the General Assembly authorized it to do so in 2003. School projects financed by RIHEBC are eligible for State Aid which can be intercepted by RIHEBC. The State Aid intercept provides a credit enhancement that provides interest cost savings for both the borrowing community and the State.
Governor Chafee added, "The RIEHBC Program benefited from legislative changes that we submitted and the legislature approved this past session, which strengthened its financing ability on behalf of our municipalities. This outstanding result reflects a collaborative approach among the Governor's Office, the Department of Revenue, the Rhode Island Department of Education, RIHEBC, and the General Assembly to support Rhode Island's cities and towns."