This page contains a single entry from the blog posted on February 17, 2009 5:56 AM. The previous post in this blog was Question. The next post in this blog is Those Pearl District handouts are really for the poor. Many more can be found on the main index page or by looking through the archives.

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Tuesday, February 17, 2009

Putting it on plastic

After several days' delay for no apparent reason, the State of Oregon has released the final pricing numbers on that $229 million of new loans that it took out last week. The yields on the bonds ranged from 1.29% on $7.2 million of double-tax-exempt payable in May 2010, to 5.435% on $435,000 of federally taxable, state-exempt bonds due in 2023.

As noted here last week, long-term double-tax-exempt issues bore some hefty yields. $16 million due in 2029 (20 years from now) will pay 5%; $19.1 million due in 2033 (24 years from now) will yield 5.125%; and $21.5 million due in 2039 (30 years from now) will yield 5.27%. Quite a nice return for the fat cats -- and not so good news for future taxpayers.

Ah, but why stop there? The state has announced that it will be borrowing another $147 million in a couple of weeks for college dorms and instructional facilities, and another $350 million the week after that for road and bridge modernization. That will make $726 million in new borrowing in less than a month -- quite a credit card bender.

Meanwhile, here's a story that confirms the sometimes shadowy nature of public finance. Money gets borrowed for a specified purpose, but then sits around unspent. That could never happen around Portland -- could it?

Comments (3)

THis is old hat. For a long time govt has advertised the cause celebre for a bond issue and then none of the proceeds go there.

Similar examples:
- Tobacco fund settlement. How much goes to cancer patients or smoking prevention, probably less than 5% the rest goes to the general fund.
- Two years ago, Teddy K said the 20% upside in education funding would go mostly for benefits.

When will voters in this state wake up and see what is really going on?

A serious question: can an individual investor buy these bonds? They are exempt from OR tax, state tax also? Can they be cashed in at any time?

I believe they are available for individual purchase, but I do not believe they can be cashed in at any time. There are doubtlessly some middlemen who will take a piece of the action as well. The official state sales pitch is here:


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