The Joint Legislative Budget Committee staff has advised the Joint Committee on Capital Review that the State Transportation Board is in the process of refinancing some of its debt and the action may reduce state general fund income by $2 million to $3 million.

The debt is $190 million in board funding obligations (BFOs), which state law allows the board to sell to the state treasurer to help accelerate construction of transportation projects. The total amount of the obligations cannot exceed $200 million, and the obligations must be repaid with interest.

The board had originally planned to refinance the debt in the spring of 2004, but moved up the action to take advantage of possible lower interest rates, says the JLBC report presented to the committee Aug 14.

Staff says the refinancing is now in progress, but its impact on the general fund won’t be known until the refinancing is completed.

The staff has calculated that the general fund will lose nine months of interest payments and that the loss could be about $1.4 million for each 1 per cent reduction in interest rates.

“The current interest rates on the BFOs range from 3.1 per cent to 4.6 per cent,” says the staff report. “Interest rates are fluctuating between 1 per cent to 2 per cent a few weeks ago, however, given the recent fluctuation in the market, it is difficult to predict where rates might be throughout this month when the BFOs are refinanced.” —