Who’s getting excited? I know everybody is just thrilled to hear some deats of our latest bond sale, so I won’t disappoint. Bear with me, there will be some nerdy details up ahead. I’m expecting hundreds of comments on this post, because I know how this stuff really brings in the crowds.

Let’s start with some of the sales that we will see shortly from Treasurer Bill Lockyer. After our successful sale of the last batch of bonds, we’re moving forward on selling a bunch of taxable bonds.  There are a bunch of reasons for pursuing taxable bonds, despite the fact that investors prefer the tax-free bonds.  First, some projects can’t be funded with tax-free bonds. Tax-free bonds generally require that they are spent on infrastructure.  These are some of the initiatives we’ve passed over the last few years, like the stem cell initiative.

But a bigger reason for this is the stimulus.  One of the ways the feds chose to help the states was through the “Build America Bonds” program, which subsidizes the sale of bonds.  This could be some big money.

The rest of the deal will finance traditional infrastructure projects that usually are funded with tax-free bonds. Lockyer will use taxable bonds instead because the U.S. Treasury will pick up part of the interest cost of the securities.

Under the Build America Bonds program, states and other municipal issuers can choose to sell taxable bonds for public-works projects and have the federal government pick up 35% of the annual interest expense on the securities.

That could be a great deal for California — depending on what it has to pay on taxable bonds. (LAT blogs 4/6/09)

The Times’ Tom Petruno then goes on to estimate how much California will have to pay by looking at some other recent bond sales. In the end, he comes up with a couple of numbers showing the amount the state would pay to be about a half of a point lower than if we sold tax-free bonds.  So, yay, marginally cheaper money!

And then we have the question of how that money is being and will be spent.  Many projects were halted last December when the administration and the controller estimated that we weren’t going to be able to pay our bills.  Many of those projects have yet to be restarted, and may not be anytime in the near future.

Thousands of infrastructure projects across California that have been on hold since December will not be funded in the coming months, state finance officials said Monday, while hundreds of others will restart as a result of the state’s recent bond sale.

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While the state’s Pooled Money Investment Board, which manages cash flow and lends money for infrastructure projects, declined to spend any money to restart projects, some work is moving forward.

The board decided to disburse the remainder of $650 million approved in January for infrastructure projects along with another $500 million as a result of the bond sale’s success: The state sold $6.5 billion in bonds, well more than its goal of $4 billion. (SF Chron 4/7/09)

A bunch of other projects were never halted, mostly because they were either too important or too expensive to stop.  As to when the remaining projects get restarted, well, I guess that will be determined by the future bond sales as well as the next round of budget fights.

We’ve mentioned California’s crashing bond rating several times over the last year or so.  That’s mostly because we keep getting downgraded. Well, yesterday was no different. We have now broke that tie with Louisiana, and we now stand alone with the worst credit rating amongst the 50 states:

Fitch Ratings downgraded California’s general-obligation bond rating Thursday due to concerns about the state’s economy and ongoing budget problems, likely raising costs for taxpayers and dampening demand for $4 billion in bonds the state intends to sell next week. California’s bond rating now ranks worst among the 50 states, according to Fitch.

The announcement came days before State Treasurer Bill Lockyer plans a bond sale starting next Wednesday to replenish the state’s Pooled Money Investment Account and enable California to begin paying out $500 million to projects that desperately need public funding to continue.

Fitch Ratings downgraded California’s general-obligation bond rating from A+ to A, which likely means the state will have to offer more attractive rates and could preclude some investors from purchasing the bonds, said Alex Anderson, portfolio manager of Los Angeles-based Envision Capital Management. Fitch had California on a negative ratings watch since early last year.(SacBee 3/20/09)

Well, there you go, there’s a few more millions out the window. Which program do you think will get the axe this time? Maybe we can just cut out the 12th grade entirely. I mean, we don’t really need Californians to know advanced math skills do we? Literature, Schmiterature.

With the bonds scheduled to go to market next week, the cost of this is going to be quite real, and will add substantially to the $8 Billion number being tossed around now. Unfortunately, the only real way to address the bond rating is to actually resolve the budget crisis, and apparently the bond agencies aren’t inclined to believe that the latest round of budget “solutions” has actually achieved a long-term solution.

I suppose their assessment is valid, but it’s sure a fine time for the rating agencies to start paying attention.  Too bad they weren’t this vigilant with the mortgage backed securities.