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Utah is getting ready to issue $1.25 billion in bonds, its largest debt offering ever.
The state expects to offer the bonds for sale later this week after it determines the interest rate they will carry.
"Things are looking pretty good in terms of our borrowing costs," said State Treasurer Richard Ellis, indicating he anticipates the interest rate should be lower than that for last year's $1 billion bond offering. Those 15-year bonds carried a 2.99 percent interest rate.
By paying lower interest on the money it borrows, the state and its taxpayers save money.
Utah is bringing its bonds to market at an opportune time.
The demand for debt issued by AAA-rated states such as Utah exceeds supply, said Tom Kozlik, a municipal credit analyst with Janney Montgomery Scott LLC, a Philadelphia-based money-management firm.
The bulk of the proceeds from the bond offering will be used to fund the continued renovation of Interstate 15. However, a little less than $100 million will be directed toward construction of several buildings at the University of Utah and Utah State University.
The upcoming bond issue may be the largest in Utah's 114-year history, topping the previous record set in 2009, but that doesn't mean the state is following the path of other states and overdoing it with its debt.
"Utah's [AAA] rating and outlook reflect conservative debt and fiscal policies, which have kept debt levels moderate and quickly amortizing [retiring] and have allowed for successful and timely action when addressing budgetary imbalances," said Fitch Ratings, a credit-ratings service, in a Sept. 8 report.
Ellis said one of the Utah's strengths — it is one of only seven AAA-rated states in the nation — is that it amortizes its debt relatively quickly. "These bonds will be retired in 15 years, while most states would take 20 to 30 years."
The planned $1.25 billion bond issue is part of $3.6 billion in general-obligation borrowing for highways that was approved by the Legislature during the past several fiscal years, Ellis said.
"Our bond offerings were carefully planned, and the Legislature built them into the state's budget," he said. "It isn't that we're out borrowing because rates are low or that there are available matching federal funds somewhere."
The more than $1 billion in bond proceeds that will be earmarked for highway construction will be enough to fund that work for the next 15 months, Ellis said, "and that will have a stimulus effect on our economy."
He added that during the next several weeks, the state will be refinancing $200 million worth of bonds issued earlier to take advantage of lower interest rates now available.
"It will help us save some money," Ellis said.
What the bond offering means
Total sought • $1.25 billion
Why now • State government needs to sell the bonds to raise money for state projects.
How will money be used • $1 billion will go to renovate Interstate 15. About $100 million will be earmarked for new buildings at the University of Utah and Utah State University.
Why is this important • In addition to needed infrastructure improvement, spending the proceeds will help give a temporary boost to the state's struggling economy.