Last month, my office refinanced the I-JOBS and Fort Madison Prison bonds, accruing a total savings of $45 million for Iowa taxpayers. “Iowa’s strong financial position and historically low interest rates made the refinancing a great success,” Fitzgerald emphasized.
In 2009, the state sold bonds to finance I-JOBS, a program that provided millions of dollars for state and local infrastructure projects, including grants for community rebuilding after the floods of 2008. The treasurer’s recent refinancing transaction, which involved issuing $265 million for these bonds at 1.7%, lowered the state’s interest rate by more than 2%.
The second refinancing transaction involved bonds that were originally sold in 2010 to build the state penitentiary in Fort Madison. This refinancing issued $80 million in bonds and lowered the state’s interest rate by about 2%.
“These transactions are a lot like refinancing your house. The I-JOBS refinancing saved the state a total of $36.5 million, while an additional $9.3 million was saved by refinancing the prison bonds,” Fitzgerald said. “This is a combined savings of over $45 million for Iowa taxpayers.”
As part of the bond-selling process, 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.”