The recent success of the Dormitory Authority of the State of New York (DASNY) in selling $1.2 billion of revenue bonds is a testament to the robust demand for highly rated state bonds in a calm market environment. According to DASNY spokesperson Jeffrey Gordon, last week’s bond sale was a success due to the favorable conditions and the inherent demand for New York State paper.
DASNY, as New York State’s capital project development authority, plays a significant role in financing and constructing science, health, and educational institutions that serve the state’s populace. Being one of the largest issuers of tax-exempt bonds in the nation, DASNY’s latest sale highlights the strength and demand for New York state paper. The high tax rates within the state, coupled with the presence of wealthy individuals in the retail market, contribute to the strong demand for New York State paper.
The authority sold $1.223 billion of tax-exempt state sales tax revenue bonds in three series in the competitive market on July 10. The authority’s strategic approach in selling the bonds to various bidding groups such as Morgan Stanley, J.P. Morgan, and BofA Securities showcases their ability to attract a diverse investor base. The competitive market pricing also resulted in tighter spreads compared to a previous negotiated deal, indicating favorable market conditions for DASNY.
The consistent issuance of state sales tax revenue bonds and state personal income tax revenue bonds by DASNY reflects the organization’s commitment to financing vital state-supported programs. As the state plans to rely on these financing vehicles for the foreseeable financial period, DASNY’s role in funding transportation projects through the Department of Transportation and New York Metropolitan Transportation Authority capital plans becomes even more critical.
The recent bond sale by DASNY received a rating of Aa1 from Moody’s Ratings and AAA from Kroll Bond Rating Agency, indicating strong creditworthiness and investor confidence. The ratings are buoyed by the strength of New York state’s sales tax revenue, which serves as a vital component of the state’s finances. The structural framework of the sales tax revenue bond program helps eliminate appropriation risk, providing stability and security for investors.
Despite challenges such as the initial impact of COVID shutdowns and uncertainty surrounding the MTA’s congestion pricing plan, sales tax revenue has demonstrated resilience and quick recovery. The rebound in sales tax revenue following economic downturns showcases the stability and consistency of this revenue source. While concerns about future burdens on sales tax and personal income tax revenue remain, DASNY’s track record and financial prudence position it well to navigate through uncertainties.
The successful sale of $1.2 billion in revenue bonds by DASNY underscores the organization’s financial strength, market demand, and strategic approach to financing essential projects for the state of New York. With favorable market conditions, strong credit ratings, and a commitment to funding vital programs, DASNY stands out as a beacon of financial stability and resilience in the municipal bond market.