Gov. Nathan Deal today announced 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. Only 11 states currently meet this standard. This rating resulted in low interest rates during the sale of $1.37 billion in bonds.
“The state of Georgia works diligently to hold onto its coveted AAA rating each year,” said Deal. “Homeowners avoid paying excessive interest on mortgages, college students prefer low-interest loans and we as a state strive to avoid paying more interest on our bonds than we already must do. I am proud that our fiscal responsibility can translate into a better use of taxpayer resources.”
In making their decisions, the agencies cited a strong and growing economy, with a positive employment trend, consistent funding of retirement plans for state employees and teachers and a significant and prudent increase in the state’s Rainy Day Fund, among other characteristics demonstrating fiscal responsibility.
The state also completed the sale in four different series of general obligation bonds, which will fund capital projects throughout the state ranging from construction on new university buildings to repairs on state bridges. A portion of these sales will also refund outstanding bonds to achieve savings.
The state acquired rates of 0.92 percent for the five-year tax-exempt bonds, 1.31 percent for the 10-year tax-exempt bonds and 2.38 percent for the 20-year tax-exempt bonds, with a blended rate of 2.31 percent for the tax-exempt bonds. Some bonds were sold as federally taxable bonds, with those rates at 1.35 percent for the five-year taxable bonds and 2.63 percent for the 20-year taxable bonds, with a blended rate of 2.58 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 $287 million for the University System of Georgia, followed by $248 million for projects related to k-12 schools. The Technical College System of Georgia will receive $126 million for various projects located throughout the state.
The bonds will further provide more than $100 million for transportation projects, while also funding more than $80 million in economic development and water/sewer projects. A complete list of funded projects is available on the GSFIC website.
In addition, $450.7 million were sold as refunding bonds to refund more than $500 million of bonds that were originally issued in 2003 through 2007, saving the state’s taxpayers slightly more than $88 million in debt service when compared to the original bonds.
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…Georgia’s strong governance framework and financial management practices have helped to support the state’s Aaa rating over many years.”
The Fitch Ratings’ report: “Georgia’s AAA rating reflects the state’s conservative debt management, proven willingness and ability to support fiscal balance and a broad-based and growing economy. The state took repeated action during the recession to maintain fiscal balance through steep spending cuts and draws from its rainy-day fund. Since then, Georgia has maintained a conservative approach to fiscal management, limiting spending growth and making progress in rebuilding the RSR balance. The state’s long-term liability burden is low.
Standard & Poor’s Rating Services: The report stated that the ratings reflected the agency’s assessment of Georgia’s “well-diversified and broad-based economic growth that is outpacing the nation; […] strong financial monitoring and oversight with a history of budget adjustments, mainly through expenditure reductions, to restore fiscal balance; additional flexibility provided by the substantial recent growth in the revenue shortfall reserve (RSR); moderate debt position bolstered by rapid amortization; and proactive management of long-term liabilities through full funding of the state’s portion of the pension contributions of other post-employment benefit fund reserves.
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