State's AA Credit Rating Benefits Municipalities
January 31, 2004
On February 5 the Alaska Municipal Bond Bank Authority will close on $19,985,000 in general obligation bonds to provide funding for projects in the City of Fairbanks and the City and Borough of Sitka. The 20-year bonds, carrying an insured rating of AAA, were purchased at competitive sale by Wachovia Securities, LLC at an interest rate of 3.69%. Of the four firms that submitted bids, Wachovia provided the Bond Bank with the lowest interest rate on the bonds.
The City of Fairbanks will use $7.5 million in proceeds to acquire land, design, and construct a new fire station in Fairbanks. The Bond Bank estimates reductions in bond payments of $45,000 over the 10-year life of this loan through use of the Bond Bank.
The City and Borough of Sitka will use $12 million in proceeds to construct a new high school auditorium. Bond Bank participation with this financing is estimated to save more than $302,000 during the 20-year life of this loan.
With both Fairbanks' and Sitka's bonds being eligible for reimbursement by the State of Alaska, a significant portion of the savings generated by the Bond Bank will accrue to the benefit of the state.
"Clearly, the Bond Bank is a mechanism that works well for Alaska's municipalities," said Governor Frank H. Murkowski. "And, coupled with the excellent credit rating we have been able to maintain for the State of Alaska through budget discipline, the cost of bonding for local projects is reduced. Everybody wins."
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