SALEM – Gov. John Kitzhaber today signed into law an Oregon Treasury-sponsored bill that could foster cost savings worth tens of millions, which would be accomplished by reclassifying existing state borrowing and obtaining lower interest rates.
“Oregonians are calling on their leaders to make smart money decisions and this makes common sense,” said Treasurer Ted Wheeler. “We will refinance many of our bonds and save taxpayers millions in interest costs.”
Senate Bill 19 will put into motion the cost-saving reforms that were authorized by voters in Measure 72, which passed in November.
The ballot referral expanded the kinds of projects that can be financed using general obligation debt. Previously, prisons and other facilities had to be financed with a more expensive category of debt known as “certificates of participation.”
Neither the ballot measure nor Senate Bill 19 authorize new borrowing: They just allow for a cheaper financing option.
The actual level of savings will be directly connected to interest rates at the time bonds are actually sold. In January, those savings would have been $70 million; today, the figure would be about $25 million.
The new law is the second event in a month that will help Oregon save money in connection with public debt, which is a powerful tool to finance education and transportation system improvements.
In March, Standard and Poor’s announced an upgrade in the state’s credit rating to AA+, which will help the state attract lower interest rates.
The new law under Senate Bill 19 also will improve the state’s debt capacity picture in future budget cycles, because that capacity calculation takes into account debt payments. Based on current forecasts, there is not projected to be any available general obligation debt capacity for the 2011-13 biennium.
For existing debt, the savings will be over the life of the outstanding bonds. The state also will stop issuing certificates of participation, because they carry higher financing costs.
The state is scheduled to sell $1 billion in new bonds through the remainder of the 2009-11 biennium, which ends June 30.
Treasurer Wheeler credited the Debt Management Division of the State Treasury for proposing the legislation that became Measure 72.
The Oregon State Treasury protects public assets and saves Oregonians money through its investment, banking, and debt management functions. The office also promotes public outreach and education to help Oregonians learn strategies to save money, invest for college and make smart financial choices.