Billions in Notes Floated by State

California Treasurer Phil Angelides successfully floated a record $5.7 billion in revenue anticipation notes Tuesday to help tide the state over until it sells $12.5 billion in bonds to finance the costs of the energy crisis.

The sale of the notes was the largest financing of any kind in the United States since the Sept. 11 terrorist attacks ground Wall Street to a halt. It was initially scheduled to take place the week of the terrorist strikes.

California’s budget has an $8-billion shortfall because the state was forced early this year to buy electricity to avoid massive blackouts. Proceeds from the $12.5-billion energy bond sale are supposed to replenish the budget and help cover ongoing power costs.

However, the bond deal, which Angelides initially planned for this spring, has encountered a series of governmental delays, and may not take place this year. The revenue anticipation notes, which are set to be repaid June 28, 2002, ensure that the state has enough money to cover its operations through the current fiscal year if the bond deal does not take place in time, Angelides said.

“As the nation strives to move forward in the wake of tragedy, California has returned to the market because of our underlying confidence in our nation’s economy,” Angelides said. “Today’s successful bond sale not only demonstrates that our state and nation are back in business, but will also result in very low borrowing costs for California taxpayers.”

The sale was a mixture of $3.85 billion in fixed-rate notes and $1.85 billion in index notes, which carry an overall yield of 2.17%. That is the lowest interest rate for a California revenue anticipation note since their inception in 1971--and was lower than it would have been before the attacks. Because the terrorist threats have made bonds a more attractive investment, demand for them expanded and the interest rate fell.