DIVISION OF THE BUDGET
ANDREW M. CUOMO, GOVERNOR
ROBERT L. MEGNA, DIRECTOR
February 13, 2014 CONTACT: Morris Peters
STATE OF NEW YORK ANNOUNCES UPCOMING BOND OFFERING
ALL THREE MAJOR RATING AGENCIES HAVE THE STATE OF NEW YORK ON POSITIVE OUTLOOK
Investor Confidence is Expected to Drive Significant Demand for Personal Income Tax Revenue Bonds and Lead to Favorable Pricing.
The New York State Division of Budget, in conjunction with DASNY (the Dormitory Authority of the State of New York), announced today the details of its upcoming bond sale of approximately $850 million of New York State Personal Income Tax Revenue Bonds. This issuance will be used to refund higher-interest bonds and replace them with lower-cost debt, generating significant savings to the State of New York.
DASNY, on behalf of the State, plans to price $800 million of tax exempt fixed-rate refunding bonds on Wednesday, March 12th. There will be a one-day retail order period on Tuesday, March 11th. The bond issue may include up to $50 million of taxable fixed rate bonds. The sale will be led by senior manager Citi, which was chosen through a competitive selection process.
“Investors recognize that New York’s finances are as strong now as they have been in a very long time,” said State Budget Director Robert Megna. “The Governor’s budgets have embraced the principle that State spending must grow more slowly than the overall economy, both to assure that the State prudently uses the resources granted to it and to leave more money in the hands of the people. We are encouraged that this principled approach and our long-term fiscal planning are being recognized by the rating agencies, all three of which have placed New York State on positive credit watch.”
“DASNY has had a long history of successful Personal Income Tax (PIT) Bond Sales. The lower-cost debt afforded by this refunding will provide substantial savings to the State,” said DASNY President, Paul T. Williams, Jr.
In the last three years, State debt practices have been substantively improved. New York has and will continue to remain within the debt cap, and measures of debt affordability are steadily moving in a positive direction:
- In every year of the Capital Plan, the debt to personal income ratio is expected to improve and represent the lowest level the State has recorded in decades.
- State-related debt outstanding as a percentage of personal income declined from 5.9 percent in FY 2011 to 5.2 percent in FY 2014, and is expected to decrease further to 4.4 percent by FY 2019.
- Debt outstanding actually declined by $680 million from FY 2012 to FY 2013 and is expected to decline again in FY 2014. This would be the first time in over fifty years that debt outstanding has declined in two consecutive years.
- Over the five-year Capital Plan, debt outstanding is projected to grow by 1.3 percent from FY 2014 to FY 2019. The growth rate is projected at 0.8 percent from FY 2011, when Governor Cuomo took office, to FY 2019. This remains well below the historical growth rate in debt and below inflation.
Investors look favorably at New York’s three consecutive on-time budgets, the setting aside of over $450 million in reserves to reduce debt and meet unforeseen “rainy day” needs, and the implementation of spending controls. The State replaced unsustainable inflators for major programs with rational formulas linked to fiscal capacity, eliminating over $70 billion in budget gaps.
The ratings for New York State’s Personal Income Tax Bonds being offered by DASNY are expected to be AAA by Standard & Poor’s and AA from Fitch Ratings.