Northeast states Massachusetts and Pennsylvania will come to market this week with general obligation bond sales of $600 million and $1 billion, respectively.
On Tuesday, Massachusetts intends to kick off a busy spring with a $600 million competitive, new-money GO sale. The fixed-rate, tax-exempt issuance will feature a $200 million Series A tranche and $400 million of Series B. Acacia Financial Group is the financial advisor.
Massachusetts will also issue $650 million of commonwealth transportation fund bonds next month through negotiation with new-money and refunding components, Deputy Treasurer Sue Perez said on an investor call.
Investors can expect an additional $500 million new-money sale for August or September.
Moody’s Investors Service rates the commonwealth’s GO bonds Aa1. S&P Global Ratings and Fitch Ratings assign AA and AA-plus, respectively. According to S&P Global Ratiings, revenues were running ahead of budget in fiscal 2021, with fiscal-year tax collections through March up 7.2% year over year.
Amortization for the Series A bonds in Tuesday’s sale is 2035 to 2042; for Series B it’s 2047 to 2051. Closing date is May 18.
The sale comes as state officials announced plans to enter the final phase of reopening from COVID-19 shutdowns.
Effective May 10, for example, indoor and outdoor stadiums, arenas and ballparks now operating at 12% capacity can increase crowds to 25%.
Massachusetts and its communities are in store for nearly $8 billion of direct federal aid under the American Rescue Plan, not including billions more of assistance targeted for categories such as education and transit.
The commonwealth was busy in the bond market last year, even as the pandemic took hold.
“To say that 2020 was interesting and dynamic was an understatement,” said state Treasurer Deborah Goldberg, who was president of the National Association of State Treasurers throughout the year.
Massachusetts held seven GO sales last year, including $1.4 billion worth of new money and $1.7 billion through five refundings. The latter included two taxable issues worth $900 million.
The commonwealth also sold three series of revenue anticipation notes in December, including two taxables.
Massachusetts Treasury also reworked its website.
The state’s pension fund, the Massachusetts Pension Reserves Investment Trust, posted a 12.6% return, or 12.1% net of fees, in calendar 2020. PRIT exceeding its benchmark of 10.8% and elevating the fund to a record $86.9 billion in assets.
Its investment return, net of fees, was $9.6 billion.
Gov. Charlie Baker’s $45.6 budget proposal before lawmakers assumes no American Rescue Plan assistance and excludes $456.5 million of projected transfers to the Medical Assistance Trust Fund. It projects a withdrawal of up to $1.6 billion from the state’s rainy-day account.
Under longstanding state law, the House of Representatives and Senate pass separate budgets, then a concurrence panel agrees on a final spending plan to send to the governor. In recent years, Massachusetts has enacted its budget after the July 1 deadline, using short interim budgets to buy time.
Pennsylvania on Wednesday intends to issue $550 million of first series of 2021 bonds and $496.6 million of first refunding series of 2021, the latter federally taxable. PFM is financial advisor.
Fitch Ratings rates the bonds AA while S&P Global Ratings and Moody’s Investors Service rate them A-plus and Aa3, respectively.
“Pennsylvania’s financial challenges will remain manageable even under a scenario of a moderately negative shock to revenue,” Moody’s said in a presale report.
Gov. Tom Wolf’s proposed general fund budget for fiscal 2022 totals $37.8 billion and represents an 11.1% increase that S&P called sizeable. It increases personal and corporate income taxes, boosts basic education funding, raises the minimum wage and legalizes adult use of cannabis.
It includes a $97.8 million deposit to the rainy-day fund, which would raise the balance to roughly $340 million. “Although we would consider this balance to be minimal, we would view progress toward rebuilding reserves withdrawn in fiscal 2021 as a positive credit factor,” S&P said.