(Raleigh, N.C.) – State Treasurer Dale R. Folwell, CPA, and the State and Local Government Finance Division (SLGFD) announced the sale of $700 million of Build NC Bonds. The bonds are part of a $3 billion transportation package approved by the North Carolina General Assembly (NCGA) in 2018. The SLGFD, a division of the North Carolina Department of State Treasurer (DST), issued $300 million of Build NC Bonds (BNC) in June 2019.
The bonds are being purchased by a syndicate led by Bank of America Securities Inc. at a preliminary all-in total interest rate of approximately 1.54%. Other members of the syndicate are Barclays, Citigroup, J.P. Morgan, Loop Capital Markets and Wells Fargo Securities.
“I‘m very pleased at the low interest rate that we were able to get,” said Treasurer Folwell. “When we’re able to finance debt at such incredible rates it’s the taxpayer that wins because it will keep their taxes down while allowing more money to be available for schools, roads and other critical needs in the state.”
The BNC bonds are limited obligations payable from the state’s Highway Trust Fund (HTF), which is separate and distinct from the state's general fund and is subject to annual appropriations by the NCGA. The bonds are being issued to finance a variety of transportation projects across the state. Revenue for the HTF comes primarily from a 3% highway use tax assessed on the retail value of motor vehicles at the time of sale and a portion of the state’s motor fuels tax revenue.
Earlier in the week, all three major rating agencies assigned “AA+” ratings to the BNC bonds. Specifically:
- S&P Global Ratings assigned its 'AA+' rating to the bonds while affirming its 'AA+' rating on the state's outstanding limited obligation (BNC) saying the outlook is “stable … [and] reflects our view that North Carolina will continue to exercise proactive fiscal management to steer through the challenges of the sudden-stop recession. It also reflects the state's commitment to strong fiscal management of the budget, reserve balances, debt, and retirement liabilities.”
- Moody’s Investors Service has assigned a ‘Aa1’ rating to the bonds noting a “… one-notch distinction in the rating from the State of North Carolina's ‘Aaa’ general obligation rating reflects the annual appropriation risk, but also incorporates the essential nature of the transportation projects financed by the bonds and the moderately strong legal structure.”
- Fitch Ratings assigned a ‘AA+’ rating for the bonds saying that, “Growth of revenues deposited in the HTF has been strong for the past ten years, following a steep decline during the Great Recession. Fitch expects long-term growth to resume at a pace that exceeds inflation as the economy recovers from the pandemic-induced downturn.”
The sale was made after a Memorandum of Agreement (MOA) between DST, the Office of State Budget and Management (OSBM) and the Office of the State Controller was signed establishing formal oversight of and accountability for any short-term loans from the HTF to the Highway Fund during the life of the BNC program. Additionally, the MOA details the specific responsibilities of the parties in managing the BNC bonds proceeds, including continuing disclosure of all financial information regarding the HTF.
“I’d like to thank Secretary Boyette and his staff for their diligence in getting the needed information to make this happen. I’d also like to thank the staff of the finance division [SLGFD] who has done an amazing job for the taxpayers of this state issuing over a billion dollars in low interest-rate debt in this year alone,” said Treasurer Folwell. “The hardworking men and women at DOT and the hundreds of contractors across the state need sustainable and consistent funding to address current and future road-building needs of North Carolinians. The finance division has really come through for all North Carolinians.”
The DST and the SLGFD handle the sale and delivery of all state and local debt and monitor the repayment of state and local government debt. More information can be found at https://www.nctreasurer.com/divisions/state-and-local-government-finance-division