State refinances debt after improved credit rating, will save $33M
Arizona Capitol Times
August 31, 2015
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Recent upgrades to Arizona’s credit rating allowed the state to refinance some its debt, saving millions in the process.
According to the Governor’s Office, the state will save more than $33 million over the next 13 years due to the debt refinancing. Daniel Scarpinato, a spokesman for Gov. Doug Ducey, said the savings are due to better interest rates the state was able to get through refinancing, as well as a generally improved environment for interest rates.
About $18 million of that comes from refinancing $163 million the state owes over the next 13 years on Capitol Mall buildings occupied by the Arizona Department of Administration, Arizona Department of Environmental Quality and several other agencies. The Governor’s Office said the first year of savings will go directly into the general fund, while future savings will come in the form of reduced rent prices.
The second pool of debt comes from a school district lease-to-own program operated by the School Facilities Board. The Governor’s Office said the state will save $15 million on about $263 million the state owes over the next nine years. All of those savings will go to the general fund.
In early May, Moody’s Investor Service upgraded the state’s issuer rating from its fourth-highest rating, aa3, to its third-highest, aa2. It also upgraded the School Facilities Board’s rating from aa3 to aa1, its second-highest rating. Moody’s cited Arizona’s improving economy and steps the state took to eliminate its structural budget imbalance for the upgrade.
About two weeks later, Standard and Poor’s Rating Service upgraded the state’s credit rating from AA- to A+, its second-highest rating.
Scarpinato credited the upgrades and subsequent savings from the debt refinancing to steps the governor and Legislature took to balance the state’s budget.
“This is just another demonstration of why it’s important to have a balanced budget, to have structural balance, because here we are starting to see the savings to the taxpayer. And this money that, rather than paying on debt can be invested in things that Arizonans care about. And so this is why these things are important and why being fiscally responsible is important,” Scarpinato said.