DES MOINES, Iowa – State Treasurer Michael Fitzgerald announced today that the state refinanced bonds that were originally sold in 2010 to build the state penitentiary in Fort Madison. Today’s refinancing transaction, which involved issuing $80 million in bonds, lowered the state’s interest rate by about 2%. “We saved over $9.3 million by refinancing the prison bonds,” Fitzgerald said. “Last week, we refinanced IJOBS bonds for a savings of $36.5 million. Combined, this is a savings of over $45 million for Iowa taxpayers.”
“This transaction is a lot like refinancing your house. Although we received a good interest rate when we initially sold the bonds, the historical lows we are seeing in the market allowed us to gain additional savings through refinancing,” stated Fitzgerald. “Iowa’s strong financial position boosted our position as well.”
As part of the process to sell the bonds, Iowa made credit presentations to Standard & Poor’s and Moody’s Investor Service. In addition to rating the bonds, Iowa’s overall AAA credit rating was affirmed. According to Standard & Poor’s review, the general credit characteristics of the state reflect:
- Good fiscal management and a structurally balanced budget;
- Maintenance of significant rainy day reserves;
- Average income levels, low unemployment and stable economic growth; and
- Low debt burden, low state employee unfunded pension liabilities and a minimal post-employment benefits liability.
“Iowa has a great story to tell. Our careful approach to financial management, diverse economy and low debt burden have helped make us one of only eleven states to be rated AAA by all three major rating agencies,” Fitzgerald stated. “Just as having a high individual credit score can help lower your interest rate when you are refinancing your home, the state gets a similar benefit from the AAA rating.”