News Release
State of Montana receives positive credit ratings based on sound financial policies
7/3/2002
Mary Schwarz
406-444-5523
mschwarz@state.mt.us
The state was reviewed by the two major national rating agencies and the rating was determined in preparation for a general obligation bond sale.
Montana maintained its favorable ratings based on a number of factors, according to Jonathan Heroux, the State of Montana's financial advisor with Piper Jaffray, based in Denver. These factors include: the rating agencies'confidence in the State's financial track record, the administration's commitment to tackle current budget challenges, and the state's low debt burden. The Administration's sound budgeting, willingness to timely address financial problems and the credibility of key administration officials impressed the rating agencies. They realize tough decisions will need to be made to address current revenue shortfalls, but are confident the decisions will be made and the budget balanced. All of these factors allowed the state to enjoy a 34 basis point "savings" on its recent borrowing relative to the average for similarly rated government borrowers in last week's sales.
"Our administration is willing to make the tough decisions to move this state forward," said Governor Judy Martz. "Economic development depends on a solid foundation and the state's bond rating is vitally important to that foundation. I am very pleased to know that the rating agencies agree with the steps our administration is taking to ensure the financial stability of our state's economy."
Unlike many other states, Montana's favorable rating and outlook was maintained by each of the reviewers. Moody's Investor Services reaffirmed its Aa3 rating. Standard and Poor's rated the State's credit at AA-. These ratings reflect the second highest rating - high quality investment grade -- available to states and indicate that Montana is viewed by outside experts as a good credit risk. Both agencies provided a stable outlook for Montana's finances, despite recent revenue shortfalls that necessitated calling a special legislative session. Many other states have seen their credit rating and/or outlook deteriorate as the national recession took its toll on their finances.
"The ratings and the very low borrowing costs reflect the strong administration and sound fiscal policy of the state to maintain a balanced budget, said Heroux. "This administration has shown that it will take the necessary and sometimes difficult actions to ensure the state's financial stability."
Montana's credit rating is important. A high ranking reduces the risk premium built into the bond thereby lowering the interest rate and the cost of the borrowing to the state's taxpayers.
The recent sale involved $12,975,000 in general obligation bonds split between two series with a borrowing cost of 4.18% for $10,425,000 of long range building bonds and 4.24% for $2,500,000 of hard rock mining reclamation bonds. The building bonds are primarily to finance improvements at the state prison and renovations of certain university system buildings.
Montana's Board of Examiners serves as the issuer of state debt and approves the sale of bonds for the state. It is chaired by the Governor and includes the Attorney General and the Secretary of State.
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