Arizona is on track to complete a big financing deal needed so the cash-short state government can pay its bills during February, officials said Jan. 6.
The Department of Administration said it plans to complete approximately $735 million of sale-leaseback financing for prisons, legislative buildings and other state properties this month.
Department spokesman Alan Ecker said the recent downgrading of the state’s credit ratings by Standard & Poor’s and Moody’s Investors Service still leaves it in a good position to complete the financing included in the current budget. That’s partly because the state has arranged insurance for the financing, Ecker said.
Even with the financing, spending cuts and other budget-balancing steps, Arizona faces a shortfall of at least $1.4 billion in the now-reduced $8.4 billion budget for the current fiscal year that is now half over.
The state would get the money by Jan. 26.
State Treasurer Dean Martin said earlier Jan. 6 that Arizona needs the financing money by the beginning of February to pay bills that month.
Gov. Jan Brewer’s December order that agencies delay payments by several days provided breathing room to make a big monthly school payment this week, Martin said.
The sale-leaseback financing buys time for Gov. Jan Brewer and the Legislature to solve the state’s underlying fiscal problems, said Clark Partridge, the Administration Department’s comptroller. “Eventually it’s going to get solved.”
The state’s timetable for the financing being done through the municipal bond market calls for offerings for the borrowing instruments – “certificates of participation” – to be made by retailer purchasers on Jan. 12 and institutional buyers on Jan. 13.
“They’re putting their orders in and we take the orders that are most advantageous for the state,” Partridge said.
He said state officials and their advisers anticipate the certificates, sold in increments of $5,000, will carry interest rates in the 4-5 percent range.