More than $100 million in savings will be used to fund economic development and school construction
PROVIDENCE, RI – General Treasurer Seth Magaziner today announced the results of a successful $175 million General Obligation bond refunding. The debt restructuring will fund economic development and school construction initiatives included in the budget passed by the General Assembly and signed by the Governor last month. The refunding transaction, completed this week, maximizes debt service savings over the next two years, yielding a total of $100.2 million in debt service savings in FY2016 and FY2017.
The proceeds from the restructuring total roughly $64 million for fiscal year 2016 and $36 million for 2017.
"This successful restructuring transaction represents an important step in Rhode Island's comeback," said Treasurer Magaziner. "By taking advantage of historically low interest rates, we can invest millions of dollars in initiatives that will put Rhode Islanders back to work and make our state more economically competitive."
$20 million of the funds generated from the restructuring will be used to seed a School Building Authority to put Rhode Islanders to work renovating and modernizing schools. $45 million has been budgeted by the General Assembly and Governor to spur job creation and economic development, including an initiative to catalyze innovative opportunities on the I-195 land, a small business assistance program and affordable housing construction funds.
"Restructuring our existing debt is a responsible way to generate resources this year and next year to spark a recovery that will put people to work," said Governor Raimondo. "All of the money will be invested in economic development to stimulate growth, including an initiative to catalyze innovative opportunities on the 1-195 land, a small business assistance program, and construction funds for affordable housing and schools."
Because of strong demand for the state's bond and low rates in the tax-exempt bond market, the average rate paid on new bonds will be 2.4% while the average rate on refunded bonds was approximately 5.2%.
In addition to funding economic development initiatives and school construction, the restructuring will produce net savings to the state on a present-value basis of $633,000.
Three credit rating agencies reviewed and reaffirmed the state's ratings for this bond issue in advance of the sale. Moody's Investors Service, Standard & Poor's and Fitch Ratings reported that Rhode Island's General Obligation bond ratings will remain rated at Aa2, AA and AA respectively.