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Washington State Sells $500 Million Build America Bonds Achieves Record Low Interest Rates

October 15, 2009
Contact: Chris McGann 360-902-9033

Washington State issued its first Build America Bonds today, taking advantage of low interest rates made possible by the two-year federal stimulus program. The proceeds from the $500 million sale provide essential financing for state transportation projects that voters support.

Domestic and international investors lined up to bid on taxable bonds that provide a 35 percent federal tax credit in interest for the state. The state had preliminary orders far in excess of available bonds, a strong indication of the state’s strong credit and broad investor demand.

As a result, Washington taxpayers received an effective interest rate that is significantly lower than what they would have to pay for a tax-exempt municipal bond. Today’s $500 million sale provided the state with an effective true interest cost of 3.52 percent.

“That’s a very significant savings for Washington Taxpayers,” said State Treasurer James McIntire. “Without the Build America Bonds program, these bonds would have cost taxpayers another $62.4 million over the life of the bonds - enough to buy another passenger ferry.”

To achieve these savings, Washington sold taxable bonds through a negotiated sale underwritten by senior managers Goldman Sachs & Co., and J. P. Morgan, and with Bank of America Merrill Lynch serving as co-senior manager. The underwriters were chosen through a competitive RFP process.

In addition to today’s successful sale, the state reached another 30-year low interest rate for tax exempt bonds when it sold on a competitive basis $230 million of new bonds and refunded $334 million of existing bonds on Wednesday.

Merrill Lynch had the lowest of six bids for the $230 million General Obligation Bonds at a true interest cost (TIC) of 4.23 percent. Merrill Lynch also bought the $213.9 million General Obligation Refunding at a TIC of 3.67 percent. Barclays Capital, Inc. had the lowest bid on a $120 million Motor Vehicle Fuel Tax refunding with a 3.71 percent TIC.

By financing the state’s borrowing needs in a cost-effective manner, Washington is able to stay on schedule with vital projects that voters support.

“We are fortunate to be able to take advantage of this federal stimulus at a time when Washington is making major investments in its transportation system,” McIntire said. “Our strong results in the bond market mean savings for taxpayers at a time when they need it most.”

Since January, the state has saved millions of dollars in financing costs compared to projected estimates including:

  • $124.6 million in total savings in debt finance.
  • More than $17 million saved in debt service for the current biennium compared to the amount lawmakers budgeted in April; and
  • Roughly $23 million in total savings from transportation financing.

For more information visit The Office of the State Treasurer’s website at