Energy Crisis Fails to Hamper Selling of California Bonds
The energy crisis is apparently not affecting California’s ability to finance its debt.
California successfully sold $982 million in bonds Tuesday to provide funds for a variety of construction projects and already approved ballot measures, including last year’s $2.1-billion parks bond.
Most of the sale, $600 million, represents new funding, while the remainder will be used to refinance older bonds at current, more favorable interest rates.
The general obligation bonds, overseen by state Treasurer Phil Angelides, will have a 4.8% rate of interest--which is actually lower than the last few general obligation bonds issued before the energy crisis.
A day before the sale, Wall Street credit-rating firm Fitch IBCA blessed the bond issue with a favorable AA credit rating, and reaffirmed its AA rating for the state’s $22.6 billion in outstanding bond debt. The two other major rating agencies, Standard & Poor’s and Moody’s, rated the bonds Aa2 and AA, respectively.
In releasing its rating, Fitch analysts concluded that, although the energy crisis is taking a substantial toll on California’s budget reserves, that money will eventually be repaid through a $10-billion bond issue that will be paid off by utility ratepayers.
Moreover, Fitch concluded, the state’s per-capita debt of $787 is moderate compared with that of other states--and the California economy has yet to show any signs of being significantly affected by the crisis.
“In anything that’s tangible--tax receipts, employment information--we have yet to see a real effect,” said Fitch vice chair Claire G. Cohen.