Biggest Bond Refunding Series in State History Saves Almost $138 Million in Debt Service Costs

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OLYMPIA, WA – Pending Congressional action potentially changing future tax policy and restricting the state’s ability to issue refunding bonds helped support the biggest single bond refunding series in Washington State history. The Office of the State Treasurer sold $742.645 million of Various Purpose General Obligation Refunding Bonds, Series R-2018C on Tuesday, November 14th. The sale was the single largest series of refunding bonds issued in State history and will reduce debt service costs to the State by almost $138 million, or 13.24% on a present value basis.

Sale Summary

The sale attracted strong interest, with bids from five institutions. The closest three, Bank of America Merrill Lynch, Citigroup Global Markets Inc., and Goldman Sachs & Co. LLC, had bids within 0.004% of one another. Bank of America Merrill Lynch won the bid at a True Interest Cost (TIC) of 2.750007%. Citigroup Global Markets Inc., at 2.754017% was the second lowest bidder of the five total bidders which also included Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, and Morgan Stanley & Co. LLC. The average life of the R-2018C bonds is 10.695 years with a final maturity date of August 1, 2035 with a delivery date of December 7, 2017. On November 14, 2017 Treasurer Davidson signed the resolution finalizing the sale of the bonds.



“Saving money by reducing the amount that Washington citizens have to pay on State debt is one of the most important things the Treasurer’s Office does.”


The refunding produces total nominal savings of $137,842,712, compared to the original debt service. In just the 2017-2019 biennium the state will save $9,008,500 in interest, with an average of $7.25 million saved per year until the final maturity date. In net present value terms the refunding produces savings of $107,782,059 or 13.24%.

State Treasurer Duane Davidson remarked, “Saving money by reducing the amount that Washington citizens have to pay on State debt is one of the most important things the Treasurer’s Office does. Right now, due to policy changes being debated in Congress, there is uncertainty in the market and that creates opportunity. We were able to issue our biggest ever series of refunding bonds at an excellent rate.”  Currently Congress is considering eliminating the ability to issue tax-exempt advance refunding bonds. The possibility that such a policy change might take effect as of January 1, 2018 likely helped fuel the strong demand for this refunding of Washington State debt.

General Obligation Bonds

General Obligation Bonds are bonds that are backed by the full faith, credit and taxing power of the state. They are primarily used to fund infrastructure projects around the state such as constructing schools, parks and other capital projects.

Unlike the US Federal Government that can issue debt to cover operating costs, Washington State’s government must balance its operating budget. Debt is issued specifically for capital projects, most of which are long-term investments – similar to how a family wouldn’t buy a house paying 100% cash down, but rather pay for it with a mortgage over time.  Just as families sometimes refund their mortgages when interest rates drop, the Washington Treasurer’s Office looks to do the same with State debt when interest rates and bond covenants allow.


The State’s bond ratings were reaffirmed in November with no change by the three major ratings agencies (Aa1/AA+, AA+) with a stable outlook.