OLYMPIA – Today, the Office of the State Treasurer (OST) sold two series of refunding bonds that will save the state approximately $45.8 million. The state’s sale of $360.0 million Various Purpose General Obligation Refunding Bonds (VPGO) and $129.8 million Motor Vehicle Fuel Tax and Vehicle Related Fees General Obligation Bonds (MVFT/VRF GO) will reduce costs by refinancing previously issued debt which funded capital and transportation projects. Both series of refunding bonds were issued as tax-exempt bonds, a structure commonly used by state and local governments to help minimize interest costs.
“Our office was able to take advantage of Washington’s strong credit ratings and good market timing to save millions through today’s refinancing in a moment when our state needs every dollar available to navigate uncertain conditions,” said Washington State Treasurer Mike Pellicciotti. “Once again, Washington issued competitive tax-exempt bonds that help make our state an attractive, reliable investment. We must retain this critical tool to keep costs low for state and local governments to finance projects and restructure debt to the benefit of every taxpayer.”
Treasurer Pellicciotti was in Washington D.C. last month urging Congress to avoid budget proposals that would eliminate tax exemption for bonds issued by state and local governments. Washington has $11.6 billion in legislatively authorized but unissued bonding authority for transportation and capital projects. Without tax-exemption, interest costs for these unissued bonds are estimated to increase by 24%. This could mean an additional $4.9 billion in debt service costs for the state over the lifetime of those bonds.
Proceeds from the tax-exempt Series R-2025D Refunding Bonds will refund the callable VPGO Bonds, Series 2016A-1 and generate savings to the state through reduced interest costs. The Series R-2025E Bonds are being issued to refund the callable MVFT GO Bonds, Series 2016B.
Backed by strong credit ratings, OST has refinanced nearly $8.5 billion of callable bonds since 2021, generating a total of $778.5 million in net present value savings.
Leading up to this week’s sale, the nation’s top credit rating agencies again affirmed Washington’s ratings, which contributed to the favorable interest rates the state achieved. Moody’s Ratings issued the highest possible rating of Aaa, while S&P and Fitch separately issued AA+ ratings for the state’s bonds.
Sale Summary:
Various Purpose General Obligation Refunding Bonds, Series R-2025D
The $360,010,000 VPGO refunding bonds, Series R-2025D are being issued to refinance the callable Various Purpose General Obligation Bonds, Series 2016A-1.
The State received six bids for the VPGO refunding bonds (maturities 2025-2040) with underwriter BofA Securities submitting the winning bid with a True Interest Cost (TIC) of 3.81%.
Motor Vehicle Fuel Tax and Vehicle Related Fees General Obligation Refunding Bonds, Series R-2025E
The $129,840,000 MVFT/VRF GO bonds were issued to refinance the callable Motor Vehicle Fuel Tax General Obligation Bonds, Series 2016B.
The State received seven bids for the MVFT/VRF GO bonds (maturities 2025-2040) with underwriter Barclays Capital Inc. submitting the winning bid with a True Interest Cost (TIC) of 3.81%.