Delaware Bonds (Delaware Municipal Bonds)

 

 

In October 2009, Delaware was awarded a triple-A rating by the country’s three major bond-rating agencies, Fitch Ratings, Standard & Poor’s Ratings Services and Moody’s. This affirmation of ratings on Delaware bonds was based on:[br]

• The state’s strong fiscal management practices

• State officials’ decisions to set apart only 98% of available revenues for the fiscal 2010 budget

• The decision to maintain the Rainy Day Fund

• Revenue forecasts made by the Delaware Economic and Financial Advisory Council

 

Delaware has maintained the triple-A bond rating across all three rating agencies since 2001. As the result of the triple-A rating, the state will need to pay the lowest interest rates on borrowed money. This will ultimately help save the taxpayers’ money. Another aspect that makes Delaware bonds a smart investment choice is that the interest from these bonds is exempt from state and federal income tax.

 

Proposed Delaware Bonds

Some of the proposed Delaware bonds as of October 2009 were:

• $515.1 million general obligation (GO) bonds: Of the total bond proceeds, $209.9 million were proposed to be used for capital projects, primarily school construction projects. The remaining of over $305 million would be used to refinance existing higher priced debt. Of the $515.1 million sold in bonds, the state planned to reserve $40 million will be for retail investors.

• Build America Bonds: Delaware planned to issue taxable bonds called Build America Bonds to benefit from the bonding provisions contained in the America Recovery and Reinvestment Act. The Build America Bonds, which earned a 35% subsidy from the federal government, were slated to be sold to institutional buyers. These bonds represented a more cost effective alternative for Delaware, as compared to the traditional tax-exempt bonds.[br] 

Status of Existing Delaware Bonds

Some of the existing Delaware bonds are:

• Delaware Health Facilities Authority’s (Nanticoke Health Services Project) outstanding bonds: Fitch Ratings affirmed the ‘BBB-‘ rating for these outstanding bonds in January 2009. Moreover, Fitch removed the bonds from the rating watch list and revised its Outlook to ‘Stable.’ The outlook reflected the strong operational turnaround that had taken place at Nanticoke over the past five fiscal quarters.

• Delaware County Authority, Pa.’s series 2005B bonds: The ratings on these bonds, issued for Elwyn Inc, were raised by Standard&Poor’s Ratings Services from ‘AA/A-1+’ to ‘AAA/A-1+’. The upgrade was based on the rating agency’s assumption that the bonds had low correlation with a letter of credit provided by Wachovia Bank and Elwyn Inc.