Saturday, 2:15 PM
Uncertain credit markets force state to again delay $750m bond
By Matt Viser, Globe Staff
Treasurer Timothy P. Cahill announced today that he would again delay floating a $750 million revenue bond because of the continued uncertainty of credit markets despite the federal government's $700 billion economic bailout.
The state had planned to seek the bond to cover day-to-day operating expenses. The state treasury has been stretched thin after making $1.3 billion in local aid payments last week. Cahill had initially delayed seeking the bond last week in hope that the federal bailout would unfreeze credit markets.
"We're not going to sell into a bad market when we don't have to," Cahill said today in a statement. "The state's cash position is solid. We will be patient and seek this additional liquidity when we have more confidence that we will get the best price for taxpayers."
The Department of Revenue reported last week that revenue for the first quarter had come in $223 million below expectations without counting nonrecurring payments. Counting those one-time payments, revenues were lagging $143 million behind what was expected. September was the worst of the three months, with revenues dropping $188 million. Nearly every type of state tax collection is down - including corporate, sales, and excise.
Day-to-day state operations will continue, according to Cahill's spokeswoman. The treasurer's office is determining how long the state can go without the $750 million bond, and when it will be safe to return to the credit market.
The $750 million bond would be taken out against future revenues. Late last month, the state borrowed $51 million in a short-term loan from investors at an interest rate of 6 percent for a practice that normally charges 2 percent interest. Cahill told the Globe at the time it was "like going to the loan shark for money."
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