Relying on low interest rates and Washington’s strong credit rating, today State Treasurer Mike Pellicciotti approved the refinancing of state debt to save Washingtonians $112 million in future debt costs, the highest amount of savings on a percentage basis from a refinancing by the Treasurer’s Office in at least 35 years, when records were first kept.
In the same way that people can refinance their house mortgages when interest rates drop, the state can refinance, or refund, its earlier bonds to create future savings by paying less in interest to investors. The timing of refinancing is important.
“I was able to approve today’s well-timed and historic refinancing of state debt because of the thoughtful preparation and planning by our office’s debt management team over the last three months,” said State Treasurer Mike Pellicciotti. “I’m thrilled that today’s debt refinancing will allow the people of Washington to keep over $100 million of their money in future years that would otherwise go to Wall Street profits,” he said.
The Office of the State Treasurer completed the pricing of one series of new money bonds and two series of refunding bonds, worth a combined total of $600,575,000 that will lock-in low interest rates for new projects as well as over $100 million or 28.5% in present value savings for the State of Washington. Today’s various purpose GO refunding bonds series R-2021C and motor vehicle fuel tax GO refunding bonds series R-2021D saw the most impressive savings produced by a Washington State refinancing since at least 1984, when looking at present value savings as a percent of the refunded bonds.
The refunding will produce annual savings ranging from $3.1 million to $11.1 million between fiscal years 2022 and 2041, totaling $112 million in gross savings.
Throughout the pandemic, the State of Washington has maintained its outstanding (Aaa) credit rating due to its sizable financial reserves and the exceptional economic growth in recent years, according to credit rating agency Moody’s Investors Service. This helped create a strong demand in the bond market for today’s sale.
The Series 2021F bonds will be used to pay and reimburse state expenditures for the construction of various state and local highway improvements and preservation projects, while Series R-2021C and R-2021DE bonds will be used to refund certain outstanding various purpose GO bonds and refund various outstanding motor vehicle fuel tax GO bonds.
Sale Summary:
MVFT & VRF GO Bonds, Series 2021F
The State received 5 bids for the $240,410,000 MVFT & VRF GO Bonds, Series 2021F, which have a final maturity date of June 1, 2046. J.P. Morgan Securities LLC submitted the best bid with a TIC of 2.50%.
Various Purpose GO Refunding Bonds, Series R-2021C
The State received 7 bids for the $164,065,000 Various Purpose GO Refunding Bonds, Series R-2021C, which have a final maturity date of August 1, 2036. BofA Securities, Inc. submitted the best bid with a TIC of 1.44%.
MVFT GO Refunding Bonds, Series R-2021D
The State received 5 bids for the $191,610,000 MVFT GO Refunding Bonds, Series R-2021D, which have a final maturity date of July 1, 2041. J.P. Morgan Securities LLC submitted the best bid with a TIC of 1.81%.