Armed with strong ratings from rating agencies and mindful of infrastructure and workforce development, Maine expects to enter the market the week of June 7 with a traded general bond sale of $ 99 million. of dollars.
The deal includes $ 82 million tax-exempt Series B bonds and $ 17 million federally taxable Series A bonds, the latter exempt from Maine income tax.
There is no early sale period.
“June is a traditional time for us to go to the market,” said state treasurer Henry Beck.
S&P Global Ratings and Moody’s Investors Service have confirmed their respective AA and Aa2 ratings, both with stable outlook.
“We have excellent credit standing,” Beck said. “We never missed a payment. We will refund you.
The proceeds of the bond will finance ports, ports, shipping, aviation, freight, rail, transit, and walking / cycling trails, as well as high-speed internet infrastructure for unserved areas and underserved.
The University of Maine and community college systems are also targeted; a competitive subsidy program from the Department of Environmental Protection to upgrade municipal culverts at watercourse crossings; and highway and bridge projects.
Improvements to community colleges are important, Beck said, “because these institutions are so essential to alleviating workforce challenges.” Approximately $ 2.2 million of the sale proceeds will be used to support upgrades to a welding lab, education center and other miscellaneous upgrades for the system.
Maine maintained its high ratings throughout the pandemic, with S&P and Moody’s reaffirming their ratings in May 2020 as the coronavirus escalated. According to S&P, the effects of the pandemic have led to downward movements for at least 22 state ratings and outlook.
“These stable ratings demonstrate that Maine is in a strong financial position, that our economy is recovering and that our state is a worthy investment,” Governor Janet Mills said.
Moody’s praised his administration’s climate change initiatives for the coastal state, which included the creation of a climate council that developed a four-year plan to meet emissions reduction targets and ensure resilience to change. climate throughout the state.
His proposals follow the council’s “Maine Won’t Wait” report.
Mills also wants to build more electric vehicle charging stations statewide; double the rate of weatherization of the house; purchase more renewable energy through the state procurement process; and create energy efficiency incentive programs for business enterprises.
According to data from Moody’s affiliate and climate intelligence firm Four Twenty Seven, Maine is moderately exposed to climate risks from extreme precipitation.
“Given Maine’s location, the state is less exposed to property damage from hurricanes, but is more exposed to damage from severe winter storms,” Moody’s said.
According to S&P, Maine’s demographic profile exposes the state to social risk over time.
“Maine is among the oldest population in the country, although the state’s population has grown over the past four years, with management reporting an increase in net immigration,” S&P said.
States that depend on older, higher-income households, S&P said, are more likely to experience declines in income, in part due to declining income in retirement.
Government officials tout a conservative GO debt profile with a quick amortization schedule, a statutory 10-year limit on final maturity, and 100% fixed-rate debt with no swap exposure.
The State has not issued tax anticipation notes since fiscal 2006.
S&P based its rating on the government’s history of making mid-year budget adjustments if necessary; recent increases in its rainy day fund; and access to a large liquidity pool that provides additional liquidity for the general fund.
“I am satisfied [that] S&P recognized the strength of the treasurer’s cash pool, which we have carefully managed during this turbulent time, ”said Beck.
The cash pool represents investments permitted by Maine law and consists of excess money in the public treasury that is “not required to meet current obligations.”
The treasurer’s office pools and invests state funds and state constituent unit funds. Generally, most securities are held to maturity or redeemed when the face value of the security is received.
As of June 30, 2020, the cost of investments purchased in the pool was $ 2.92 billion with a weighted average effective maturity of 244 days.
In April, Maine’s non-partisan revenue forecasting committee raised the state’s general fund revenue forecast to a level that exceeded the amount of revenue it forecasted before the pandemic began. The last is calling for $ 940 million in additional tax revenue over the next two fiscal years.
The Fiscal Stabilization Fund or Rainy Day Fund increased by more than $ 50 million under Mills’ tenure, to a record high of $ 267.9 million. Mills offered to deposit an additional $ 52 million into the fund.
The positive ratings “are a testament to this administration’s disciplined budgetary approach and the impact of the federal relief,” said Kirsten Figueroa, commissioner of the Department of Administrative and Financial Services. “With low interest rates, Maine is financially well positioned to undertake a bond offering.”
Beck, Figueroa and other senior state officials briefed Moody’s and S&P by phone on May 18.
Raymond James is a senior executive. Goldman, Sachs & Co. is Co-Managing Director. JPMorgan and Siebert Williams Shank & Co. LLC are co-managers. Hilltop Securities is the city councilor. Locke Lord LLP is a bond advisor.
Volcker Alliance, in its states bulletin, gave Maine a B for fiscal year 2015 to 2019 in its five budget categories: budget forecasts, budget maneuvers, budget transparency, legacy costs and reserve funds.
Its most notable improvement over the period, according to the think tank, is in legacy costs, which include public worker pensions and other post-employment benefits, primarily healthcare.
Maine began making actuarially determined OPEB contributions in 2017 and exceeded the actuarial sum of $ 9.4 million in 2018. The actions contrast with the 27 states that did not provide OPEB actuarial funding.
Maine’s pension funding ratio of 84% in 2019, 13 percentage points above the all-state total, also contributed to the score.
State lawmakers have returned to Augusta for the final push on the next biennial budget, which begins July 1. Mills’ “Part 2” budget, which brings his proposal to $ 8.8 billion, would add $ 187 million to funding public schools to pay 55% of local education costs.
Maine voters approved this funding ratio in a 2004 referendum.