12/29/2009
In November, West Virginia sold two separate bond issues that will provide significant funding for secondary schools and higher education institutions throughout the state. While bond sales are not uncommon to finance state construction projects, the most recent ones are significant because of the low borrowing cost the state was able to achieve, and the high percentage of in-state retail investors.
On Nov. 17, the West Virginia School Building Authority sold approximately $48 million in bonds to finance primary and secondary school facilities. This was the second financing for the SBA for Qualified School Construction Bonds, a financing program authorized in the American Recovery and Reinvestment Act that has enabled the state to borrow at a substantially reduced overall cost. In July, West Virginia became the first state in the country to utilize the Qualified School Construction Bonds program statewide.
For the November school construction bond issuance, the state’s borrowing rate was approximately 1.75 percent, compared with a borrowing cost of approximately 4.35 percent if traditional financing methods were used.
The governor said the importance of maintaining healthy bond ratings for the state may not on its surface sound like a priority, but the strategy is paying off for taxpayers. “When it comes to financing our state’s needed infrastructure, we’re saving millions of dollars because we’ve been responsible and our bond ratings are very high,” the governor said. “By being able to issue bonds at lower rates, we not only have a smaller debt service, we have more money to put toward essential school projects.”
The second financing was a $78 million bond issue by the West Virginia Higher Education Policy Commission to finance capital improvements for community and technical colleges.
For HEPC financing, retail investors submitted orders for the bond totaling over $54 million, a substantial number of orders from retail that reflects the confidence of investors in the state’s finances. In other words, about 70 percent of the issue was from retail investors, most of which are in-state, and which may be the highest ever percentage for a West Virginia bond issue. This is another indicator of the state’s strong financial health, the governor said.
Contact Information
Jama Jarrett or Melvin Smith
304-558-2000