Oregonians Will Save $45.2 million in Interest Payments Thanks to Recent Bond Refinancing by the State Treasury

Cheaper ‘refunding’ sales to reduce payments for college and armory projects.

SALEM – At the Oregon State Treasury, there’s a strong interest in saving taxpayers money. One of the best ways to achieve that goal: Reduce interest rates.

Oregonians will save an estimated $45.2 million in loan-related costs thanks to the successful refinancing of state-issued bonds thus far in 2013, State Treasurer Ted Wheeler announced.

“Oregonians expect us to get the biggest bang for their buck, and the State Treasury is constantly looking for ways to save money,” Wheeler said. “Today’s low interest rates are creating opportunities to stretch dollars, and we are taking advantage.”

Several outstanding general obligation bond series, sold from 2004 to 2009, were refunded and resold at lower rates. In addition, the State Treasury sold bonds for new capital projects, including:

• $189.5 million for projects managed by the Department of Administrative Services including the military readiness center in The Dalles and the headquarters of the Department of Fish and Wildlife. The refinancing portion of this bond issue yielded present value savings is $18.7 million.
• $249 million in Oregon University System general obligation bonds funding nine capital projects on four campuses. The present value savings for refinanced bonds included in this sale totaled $26.5 million.

The rate on both bond sales was about 2.7 percent.

Treasurer Wheeler recognized the Treasury Debt Management Division for overseeing the successful refinancing initiative. The division monitors public bonding in Oregon, sells Oregon bonds, and makes formal presentations to credit rating firms.

State debt is a tool that can create assets of lasting value, which can help improve Oregon’s economic competitiveness and quality of life.  Those include buildings or technology improvements to improve transportation, public safety and education advancement, and seismic upgrades to existing structures. However, bonds also must be used judiciously: The state has limited debt capacity.

“Refunding” sales allow the state to take advantage of low interest rates in the municipal bond market. Several factors have combined to make this a particularly opportune time to save money, including record-low interest rates, an improved state credit rating since bonds were first sold during the past decade, and the passage of Ballot Measure 72 by voters in 2009. That measure allowed additional purposes for general obligation debt, which attracts lower rates compared to other types of bonds.

Oregon’s stronger credit rating is a result of the state’s ongoing balanced budget, budgeted reserves, and adherence to the state’s bonding capacity limits.

Treasury has now saved more than $100 million since the beginning of 2012, simply by refunding bonds to lower rates.

The Oregon State Treasury protects public assets and saves Oregonians money through its investment, banking, and debt management functions. State investment policies are overseen by the Oregon Investment Council. The State Treasury also promotes public outreach and education to help Oregonians learn strategies to save money, invest for college and make smart financial choices. You can track Treasury-related news on Twitter at @OregonTreasury.