Jennifer Hassemer | Assistant Commissioner for Debt Management

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Presentation transcript:

Jennifer Hassemer | Assistant Commissioner for Debt Management Overview of State Appropriation Bonds Presentation to the Legislative-Citizen Commission on Minnesota Resources Jennifer Hassemer | Assistant Commissioner for Debt Management July 18, 2018

Purpose of Presentation Review bond basics Provide background on state bonding Compare general obligation and appropriation bonds Review ENRTF bond authorization from 2018 legislation

What is a Bond? Municipal bonds are debt securities Issued by states, cities, counties and other governmental entities Finance capital projects The bond issuer agrees to pay interest and the return on the investment, the principal, to the bondholders who have loaned the issuer money for the project(s)

Characteristics of Bonds Issuer Purpose Credit structure/source of repayment Maturity structure Call feature Price Tax status Interest rate Term Rating

State Bonding Background The State can only issue debt with legislative authorization Constitution governs issuance of general obligation debt, and legislature must authorize issuance of general obligation bonds Specific legislative authorization required for other forms of obligations Types of debt historically issued by MMB General obligation bonds State appropriation bonds Certificates of participation Revenue bonds

Comparison of General Obligation and Appropriation Bonds General obligation bonds (various purpose and trunk highway) State’s full faith and credit pledged Lowest interest cost Current state ratings: AAA/Aa1/AA+ Legislative authorization required for each project State appropriation bonds Payment of debt service is subject to the annual appropriation of the legislature Slightly higher interest cost Rated one “notch” below the State’s GO rating: AA+/Aa2/AA Added flexibility compared to general obligation bonds

ENRTF Appropriation Bonds Minn. Stat. Sec. 16A.969 General authorization for MMB to issue ENRTF appropriation bonds Laws 2018, Ch. 214, Art. 6, Sec. 4 MMB can sell ENRTF appropriation bonds to finance $98 million in project costs Legislature appropriated ENRTF funds to MMB through FY39 for debt service $2,940,000 in FY19 $7,840,000 each year in FY20 through FY39 Projects are subject to the rules and requirements of Minn. Stat. Ch. 116P

Jennifer Hassemer | Assistant Commissioner for Debt Management Thank you For more information: Jennifer Hassemer | Assistant Commissioner for Debt Management Jennifer.Hassemer@state.mn.us 651-201-8079