Substantial bonding capacity for 2019-21 biennium can help finance new infrastructure, affordable housing, and overdue repairs
State Debt Policy Advisory Commission recommends prudent debt limits to protect state credit ratings
Oregon will be able to finance a wave of new public infrastructure projects and affordable housing in the next two years, according to the new recommendation for Oregon’s prudent debt ceiling.
In its annual report, released today, the State Debt Policy Advisory Commission said the state can borrow more than $1.4 billion in the 2019-21 biennium in General Fund and Lottery-backed debt -- while still protecting the state’s strong credit ratings -- thanks to healthy reserves and a strong economy.
At the same time, commission members also highlighted the state’s sizable backlog of deferred maintenance for schools and other public buildings. In many cases, state and local government buildings face significant risk of failure in the event of an earthquake.
“Safe and resilient public facilities improve the quality of life for every Oregonian,” said State Treasurer Tobias Read, the chair of the commission. “There isn’t enough debt capacity to finance every project, so we are recommending that the Legislature give strong consideration to resiliency along with other critical needs like affordable housing.”
In addition to projecting debt capacity, the five-member commission offers general recommendations about improving how Oregon prioritizes its debt, and protecting the state’s credit rating.
In addition to the State Treasurer, the members are Sen. Betsy Johnson, D-Scappoose; Rep. Nancy Nathanson, D-Eugene; Katy Coba, the director of the Department of Administrative Services; and University of Oregon economist Tim Duy, who represents the public.
A high-quality credit rating enhances the state’s ability to attract investors and obtain low-cost capital financing. Oregon continues to be regarded as financially sound, evidenced by General Obligation debt ratings of AA+/Aa1/AA+ by Standard & Poor’s, Moody’s Investors Service, and Fitch Investors Service respectively. The Lottery bond program also continues to garner strong ratings of AAA and Aa2 by Standard & Poor’s and Moody’s Investors Service, respectively.
The report notes that “long-term debt capacity remains modest compared to the wide range of potential new state and local capital projects, seismic and other building improvements, information technology upgrades, and other infrastructure needs requested of the State legislature for state bond funding.” You can read the report here: https://www.oregon.gov/treasury/oregon-bonds/Documents/Financial-Empowerment-SDPAC/2019-SDPAC-Report-Final%202019-01-28.pdf
The commission said the capacity calculus could change based on long-term interest rates – which determine the cost of debt – and whether the state’s revenue collection matches expectations. It also noted that factors such as lawsuits can impact available debt capacity.
The recommended debt capacity allows for: • $1.15 billion in the 2019-21 biennium for bonds that are repaid from the General Fund. The General Fund is made up mostly of income tax revenue. • $305 in the coming biennium in Lottery revenue-repaid bonds.
The recommended prudent state debt capacity does not include revenue bonds, which are financed with a dedicated income source such as gas taxes or other fees, or conduit bonds, which are repaid by business or nonprofit entities -- not the state.
The Oregon State Treasury improves the financial well-being of all Oregonians. We provide low-cost banking, debt management and investment programs for governments, and empower Oregonians to invest in themselves and their loved ones for a more secure future, through the Oregon College Savings Plan, Oregon ABLE Savings Plan, and OregonSaves.
In its annual report, released today, the State Debt Policy Advisory Commission said the state can borrow more than $1.4 billion in the 2019-21 biennium in General Fund and Lottery-backed debt -- while still protecting the state’s strong credit ratings -- thanks to healthy reserves and a strong economy.
At the same time, commission members also highlighted the state’s sizable backlog of deferred maintenance for schools and other public buildings. In many cases, state and local government buildings face significant risk of failure in the event of an earthquake.
“Safe and resilient public facilities improve the quality of life for every Oregonian,” said State Treasurer Tobias Read, the chair of the commission. “There isn’t enough debt capacity to finance every project, so we are recommending that the Legislature give strong consideration to resiliency along with other critical needs like affordable housing.”
In addition to projecting debt capacity, the five-member commission offers general recommendations about improving how Oregon prioritizes its debt, and protecting the state’s credit rating.
In addition to the State Treasurer, the members are Sen. Betsy Johnson, D-Scappoose; Rep. Nancy Nathanson, D-Eugene; Katy Coba, the director of the Department of Administrative Services; and University of Oregon economist Tim Duy, who represents the public.
A high-quality credit rating enhances the state’s ability to attract investors and obtain low-cost capital financing. Oregon continues to be regarded as financially sound, evidenced by General Obligation debt ratings of AA+/Aa1/AA+ by Standard & Poor’s, Moody’s Investors Service, and Fitch Investors Service respectively. The Lottery bond program also continues to garner strong ratings of AAA and Aa2 by Standard & Poor’s and Moody’s Investors Service, respectively.
The report notes that “long-term debt capacity remains modest compared to the wide range of potential new state and local capital projects, seismic and other building improvements, information technology upgrades, and other infrastructure needs requested of the State legislature for state bond funding.” You can read the report here: https://www.oregon.gov/treasury/oregon-bonds/Documents/Financial-Empowerment-SDPAC/2019-SDPAC-Report-Final%202019-01-28.pdf
The commission said the capacity calculus could change based on long-term interest rates – which determine the cost of debt – and whether the state’s revenue collection matches expectations. It also noted that factors such as lawsuits can impact available debt capacity.
The recommended debt capacity allows for: • $1.15 billion in the 2019-21 biennium for bonds that are repaid from the General Fund. The General Fund is made up mostly of income tax revenue. • $305 in the coming biennium in Lottery revenue-repaid bonds.
The recommended prudent state debt capacity does not include revenue bonds, which are financed with a dedicated income source such as gas taxes or other fees, or conduit bonds, which are repaid by business or nonprofit entities -- not the state.
The Oregon State Treasury improves the financial well-being of all Oregonians. We provide low-cost banking, debt management and investment programs for governments, and empower Oregonians to invest in themselves and their loved ones for a more secure future, through the Oregon College Savings Plan, Oregon ABLE Savings Plan, and OregonSaves.
Contacts
Amy Wojcicki
Treasurer Read’s office
Oregon State Treasury
503-373-7406
Treasurer Read’s office
Oregon State Treasury
503-373-7406
James Sinks
Investments, debt management, banking, public records
Oregon State Treasury
503-881-4747
Investments, debt management, banking, public records
Oregon State Treasury
503-881-4747
Kasey Krifka
Oregon Savings Network
Oregon State Treasury
503-431-7976
Oregon Savings Network
Oregon State Treasury
503-431-7976
