Deal: Georgia Nets Low Rates, Earns Top Marks for Bonds

Press Release

Gov. Nathan Deal announced today that Georgia has maintained its AAA bond rating and sold $1.28 billion in three different series of general obligation bonds to fund capital projects throughout the state, which range from construction on new university buildings to repairs on state bridges. A portion of these sales will also refund outstanding bonds to achieve savings.

"Our consistent triple-A ratings, which make our bonds highly sought-after, have allowed Georgia to again secure low interest rates through a competitive bidding process," Deal said. "These rates will ultimately save millions in taxpayer dollars."

The state acquired rates of 1.21 percent for the five-year tax-exempt bonds, 1.93 percent for the 10-year tax-exempt bonds and 3.08 percent for the 20-year tax-exempt bonds, with a blended rate of 2.98 percent for the tax-exempt bonds. Some bonds were sold as federally taxable bonds, with those rates at 1.68 percent for the five-year taxable bonds, 2.59 percent for the 10-year taxable bonds and 3.77 percent for the 20-year taxable bonds, with a blended rate of 3.55 percent for the federally taxable bonds. The interest on all the bonds is exempt from Georgia state income taxation for local residents.

The Georgia State Financing and Investment Commission (GSFIC), which is responsible for issuing the bonds, approved the sale at its meeting today. The largest amount of funding will provide $288 million for the University System of Georgia, followed by $202 million for projects related to K-12 schools. The Technical College System of Georgia will receive $93 million for various projects located throughout the state.

The bonds will further provide $186 million for transportation and transit projects, which were priorities during this past legislative session, while also funding the final $35 million for the Savannah Harbor deepening project, which will help keep the state economically competitive. A complete list of funded projects is available on the GSFIC website.

In addition, $276 million will refund bonds that were issued in 2005, saving the state's taxpayers slightly more than $29 million in debt service when compared to the original bonds.

Last week Georgia again earned a rating of AAA, with a stable outlook, from each of the three main credit-rating agencies -- Moody's, Fitch and Standard & Poor's -- reaffirming its credibility in the bond market. Only 10 states currently meet this standard.

In making their decisions, the agencies cited a diverse economy which has led to strong employment and revenue growth; steady funding of the retirement plans for state employees and teachers; and conservative fiscal management, which prevents problems down the road. This last factor involves balancing the budget, using conservative revenue estimates when making funding decisions and restoring the state's Rainy Day Fund to help ease the burden of future economic downturns.

Excerpts from the Bond Rating Agency Reports

Moody's, Fitch and Standard & Poor's individual ratings are Aaa, AAA and AAA, respectively, which are the highest ratings available and indicative of sound fiscal management.

Moody's Investors Service: "The highest rating is supported by Georgia's conservative fiscal management, demonstrated by the rapid replenishment of budgetary reserves after the last recession, as well as the state's moderate debt burden and diverse economy. The outlook for Georgia is stable, based on our expectation that the state's conservative management will maintain fiscal stability even in the face of economic weakness."

The FitchRatings' report: "The longstanding 'AAA' rating and Stable Rating Outlook on Georgia's GO bonds reflect its conservative debt management, a proven willingness and ability to support fiscal balance and a diversified economy. The state took repeated action during the recession to maintain fiscal balance through steep spending cuts, use of federal stimulus and draws from its rainy-day fund; the revenue shortfall reserve (RSR). Since then, it has maintained a conservative approach to fiscal management, curbing spending growth and making progress in rebuilding the RSR balance. The state's long-term liability burden is moderate as a percentage of personal income."

Standard & Poor's Rating Services: The report stated that the ratings reflected the agency's assessment of Georgia's "well-diversified economy; strong financial monitoring and oversight with a history of making budget adjustments, mainly through expenditure reductions to restore fiscal balance; revenue shortfall reserve (RSR), … [which] provides the state with some financial cushion; and moderate debt levels coupled with rapid amortization of its debt."

Source