The Year in Review
During Fiscal Year 2021, the Debt Management Division actively managed the State’s $26.7 billion debt portfolio. Significant accomplishments included:
- New Money Bonds - A total of $2.4 billion of new money bonds were issued to continue funding of the State’s capital programs including local school construction grants, economic development initiatives, transportation infrastructure, improvements at the state universities and colleges, and Clean Water and Drinking Water grants . These projects help bolster the local economy and improve the lives of all Connecticut citizens.
- Refunding Bonds - As interest rates continue to remain very low, bonds were refunded through the issuance of $343.1 million of General Obligation, Special Tax Obligation, (Transportation Infrastructure), and University of Connecticut refunding bonds. The Division also assisted with the issuance of CHEFA and CHFA refunding bonds payable from the General Fund to capture the lower interest rates in the current marketplace which will provide aggregate debt service savings of $45.8 million over the life of the bonds. In addition, the Division redeemed $15.8 million of Bradley Airport Parking Revenue bonds and $45.8 of State Revolving Fund, Clean Water Fund bonds, with available funds. Furthermore, the Division executed two “forward refunding” transactions to lock in additional refunding savings of $83.9 million over the life of the bonds, a new industry trend.
- Credit Ratings Upgrades – During the year, Connecticut was able to continue to build its fiscal health and manage effectively through the pandemic as compared to other states, which culminated in several significant credit rating upgrades. In November 2020, and again in May 2021, Treasurer Wooden and the Office of Policy and Management’s Secretary McCaw and staff met with the four major bond rating agencies through video conference calls. The presentations highlighted the State’s strong fiscal practices and included specific comparisons of Connecticut to higher-rated states using each specific credit rating agencies’ own metrics and criteria. All four of the credit rating agencies upgraded the State’s General Obligation bonds, three upgraded the State’s Special Tax Obligation bond program, and two upgraded the University of Connecticut bonds. These were the first credit rating upgrades of the State’s General Obligation bonds in over 20 years and the first time ever that three credit rating agencies all upgraded the State at once.
- Industry Leadership - Continuing its market leadership, Connecticut sold its first issue of “Social Bonds” to fund the State’s socially beneficial and progressive local school construction program and updated the bondholder disclosure sections of its Official Statement for the Social Bonds as well as COVID, Climate Change, and Cybersecurity, all areas of increased focus for investors nationwide.
- General Obligation Bond Sales – The Division’s first General Obligation bond sale of the fiscal year occurred in January 2021 with an $800 million new money offering. This sale was significant as it marked a continual trend of narrower bond pricing spreads, which indicates investor confidence in the State’s bonds. General Obligation bond spreads had widened in recent years due to investor concerns over the State’s long-term pensions and low budget reserves but have been moving back to more historic levels as pension reform measures were adopted and reserve levels reached an all-time high. The January sale achieved the lowest bond pricing spreads since 2014 and resulted in an overall interest cost of 1.80% on the 20-year new money bonds, the lowest tax-exempt borrowing cost on record.
- Carefully monitoring market conditions, the Division successfully brought the sale of $990.5 million of General Obligation bond sales at the end of the fiscal year in four series. The $300 million ten-year taxable sale achieved an overall interest cost of 1.61%, the lowest taxable interest rate on record. The $300 million tax-exempt General Obligation bond sale was marketed as Social Bonds, the State’s first. The sale also included two series of refunding bonds, one a forward refunding, that will save $60 million over the life of the bonds.
- Transportation Bonding Program – In May 2021, the Division managed the issuance of $875 million of new Special Tax Obligation bonds to fund new and ongoing transportation infrastructure improvements, which achieved a record low 2.12% borrowing cost for the program. The bond sale provided total funding of $1.03 billion for statewide transportation infrastructure investments. The sale also included two series of refunding bonds refinancing existing bonds for a total savings of $32.2 million over the life of the bonds. The sale attracted record participation by retail investors as total retail orders were $512 million, breaking the previous retail record for the Special Tax Obligation program established in 2020. Throughout the year, the Division continued to consult with the State’s Department of Transportation and the Office of Policy and Management on bonding matters including various funding sources and alternative financing strategies related to the transportation bonding program.
- University of Connecticut – The Division worked in conjunction with the University of Connecticut on issuing new money UConn 2000 bonds totaling $160.2 million as well as $119.1 million of refunding bonds. The bond sale attracted $455 million of retail orders, a record for this program; achieved an overall interest cost on the funding of 2.19%, also a record for this program; and saved $29 million through refunding savings.
- State Revolving Fund (SRF) (Clean Water and Drinking Water Fund) - The Division worked closely with the State’s Department of Energy and Environmental Protection and the Department of Public Health to successfully commit low-cost funding for program participants throughout the State. Given the very low level of interest rates, the Division developed policies and procedures to effectively manage Clean Water loan prepayments in a manner designed to mitigate long-term impacts on the Fund while being fair to borrowers.
- Quasi-Public Agencies – Interfaces with the State’s quasi-public agencies continued as the Division worked with several quasi-public agencies on debt issuance and refundings that require Treasurer approval and State disclosure. They include CHFA, CHEFA, CHESLA, and CGB.
- Vendor Searches - The Division continues to manage several important vendor searches. A Request for Proposals for bond underwriting and another for auditing and accounting services were successfully completed. Requests for Proposals for bond counsel as well as for a new debt management computer system were both issued and are still underway.