The country’s three major bond-rating agencies are praising Delaware for its fiscal management practices by awarding the state a triple-A bond rating. Moody’s Investors Service, Standard and Poor’s, and Fitch Ratings all gave Delaware a triple-A bond rating, the highest-quality rating possible. Delaware has maintained its triple-A bond rating since 2000.
“Delaware is doing an exceptional job at remaining fiscally disciplined,” says Governor Markell. “Given our recent economic challenges, we have collectively worked together to keep Delaware financially sound. I give credit to Delaware legislators and state administrators for making some tough choices during tight times to help keep the state’s fiscal house in good order.”
In its ratings review, bond rating agencies specifically cited the state’s healthy pension status, as well as its decision to proactively manage its declining revenues. The agencies also praised the Delaware Economic and Financial Advisory Council for the frequency of its revenue forecasts.
“The highest rating assigned to the state’s general obligation debt is based on strong financial management characteristics and a history of maintaining ample budgetary reserves throughout recent economic cycles,” Moody’s wrote in its report on Delaware.
The state is proposing issuance of $298.8 million of its general obligation bonds. $259.6 million represents new money for capital projects, primarily school construction projects, while over $39.2 million will refinance existing higher-priced debt.
Refinancing at lower rates presents a considerable savings opportunity for the Delaware’s debt service. “Rates are still relatively low, so refinancing existing debt will continue to save the State money,” says Tom Cook, Secretary of Finance. Of the $298.8 million in bonds being sold, all of the tax-exempt bonds will be available to retail investors.
In addition, the State will issue taxable bonds known as Build America Bonds, taking advantage of the bonding provisions contained in the America Recovery and Reinvestment Act. The Build America Bonds, which earn a 35% subsidy from the federal government, will be sold to institutional buyers. “Build America Bonds are a great benefit to Delaware because of the 35% subsidy from the federal government. They are more cost-effective for the state than our traditional tax-exempt bonds,” says Cook.
release from the Office of the Governor