State Treasurer Issues Advance Refunding Bonds Ahead of Congressional Tax Reform

Capitol Dome

Olympia, WA –The Office of the State Treasurer sold over $500 million of Various Purpose General Obligation Refunding Bonds, Series R-2018D on Thursday, November 30th.The sale will reduce debt service costs to the State by almost $70 million, or 9.79% on a present value basis. Combined with a larger series that sold two weeks ago, the Treasurer has issued more than $1.244 billion in advanced refunding bonds in November, producing total debt service savings over $200 million. These two transactions make November 2017 the largest month ever for the issuance of Washington State refunding bonds.

Sale Summary

The sale attracted strong interest, with bids from five institutions. Morgan Stanley& Co, LLC won the bid at a True Interest Cost (TIC) of 3.034983%. Citigroup Global Markets Inc., at 3.039442% was the second-lowest bidder of the five total bidders, which also included J.P. Morgan Securities LLC, Bank of America Merrill Lynch, and Goldman Sachs & Co. LLC. The average life of the R-2018D bonds is 12.344 years with a final maturity date of August 1, 2035, and a delivery date of December 20, 2017.

On November 30, 2017, Treasurer Davidson signed the resolution finalizing the sale of the bonds.

$200 million in debt service savings isn’t pocket change

Davidson remarked, “Overall the sale went very well. I am extremely happy with the results and, depending on what happens in Washington, D.C. over the next couple weeks with tax reform, I think we are going to see that these refunding sales were timed very well. $200 million (over the last two refunding sales) in debt service savings isn’t pocket change.”


The refunding produces total cash flow savings of $69,215,749 when compared to the original debt service. In just the 2017-2019 biennium the state will save $6,468,330 in debt service payments, with an average annual savings ranging from $1.4 to $6.3 million per year throughout the life of the refunding. In net present value terms, the refunding produces savings of $52,487,584 or 9.79%.

Congressional Tax Reform

Currently, Congress is considering eliminating the ability to issue tax-exempt advance refunding bonds. The change is included in both the Senate and House Tax plans. 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. The Senate Tax Plan is scheduled for a vote either late Thursday night or Friday.