Massachusetts goes competitive with $961M tax-exempt sale

BY SourceMedia | MUNICIPAL | 09/20/21 09:45 AM EDT By Paul Burton

Massachusetts, flush with cash but still managing the effects of the COVID-19 pandemic, intends to competitively sell $961 million of tax-exempt general obligation bonds on Tuesday.

?It?s pretty obvious that this past year has been an extraordinary one for the commonwealth in a number of ways,? Gov. Charlie Baker said on Friday?s investor call.

The commonwealth will issue $385 million in Series C new money bonds, with maturities through 2047. Series D involves $350 million of new money, with long maturities through 2051. The Series A $226 million refunding has maturities running through 2030.

Acacia Financial Group Inc. is the municipal advisor.

Moody?s Investors Service rates the bonds Aa1. S&P Global Ratings and Fitch Ratings rate them AA and AA-plus, respectively. All three have stable outlooks.

Massachusetts is also planning a $550 million sale in December, according to bond documents.

Baker on July 16 signed a $47.6 billion fiscal 2022 budget, up about 3.6% from the previous fiscal year.

The commonwealth closed fiscal 2021 with revenues about $5 billion above benchmark. Strong economic activity ?came as a bit of surprise to some of us,? Baker said. Its stabilization fund, or rainy-day account, holds a record high $4.6 billion.

?Massachusetts' credit is generally strong with large fund balances and a prosperous economy, but liabilities are elevated and pension funding is weak,? said John Ceffalio, senior municipal research analyst for CreditSights.

The commonwealth has just begun to allocate the $5.3 billion of direct federal aid it received from the federal American Rescue Plan.

?One place the state could allocate more cash is in its pension systems,? Ceffalio said. ?Funding levels are low and the state typically contributes about three-quarters of what actuaries recommend.?

Massachusetts expects its pension contributions for fiscal 2022 to total $3.4 billion, or just above 10% of the state's tax revenues. Current law calls for zero amortization of unfunded liabilities by the end of fiscal 2040.

?The commonwealth will continue its trend of strong financial management as it continues to navigate through the economic impacts of the coronavirus pandemic,? Moody?s said.

Massachusetts reported 18,400 pandemic-related deaths, the nation's fifth highest per capita, according to the New York Times (NYT) compilation of state and federal data. Most deaths in the state were early in the pandemic.

State officials have reported that 78% of adult residents are fully vaccinated, fourth highest nationally. The state's jobs as of July were 6.2% below the February 2020 seasonally adjusted peak, greater than the nation's 3.7% loss.

?We think the state's high vaccination rates and [thus far] low case count through the Delta spike bode well for the state's continued recovery,? Ceffalio said.

James MacDonald, the commonwealth?s first deputy treasurer, has received a special recognition award from the National Association of State Auditors, Comptrollers and Treasurers.

?When I think of what a model public finance employee looks like I think of Jim,? State Treasurer Deborah Goldberg said.

NASACT President and California State Auditor Elaine Howle presented MacDonald the award for his sustained service as an active member and his insightful perspective representing state treasurer interests.

MacDonald is in his 10th term as a member of the Select Board in Dedham, a Boston suburb, and has been its chair six times.

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.