CALIFORNIA PUBLIC WORKS BOARD BONDS RATED 'AA' BY FITCH -- FITCH FINANCIAL WIRE --
CALIFORNIA PUBLIC WORKS BOARD BONDS RATED 'AA' BY FITCH
-- FITCH FINANCIAL WIRE --
NEW YORK, Dec. 13 /PRNewswire/ -- The state public works board of the state of California's $38.5 million lease revenue bonds 1991 series A (Franchise Tax Board Central Office Project-Phase II) are rated 'AA' by Fitch. The bonds will be sold through negotiation by a syndicate led by Dean Witter on Dec. 16. The credit trend is stable.
Credit strength is based on essentiality of the project, an office building to be used by the Franchise Tax Board, the agency responsible for income and other tax collection within the state. The building represents the second phase of a two building plan, with the first office facility occupied by the tax board since 1986. The rating also is based on California's strong long-term credit prospects, although the state currently faces another significant projected budget gap.
Bond proceeds will be used to finance construction of Phase II of building development for the Franchise Tax Board. The new building will be adjacent to the Phase I building and is expected to be occupied by May 1993. The bonds are secured by lease rental payments made by the lessee, the Department of General Services, though the department intends to charge the tax board for the payment. The department is the ultimate obliger under the lease and remains obligated for the rental payments as long as it has use and occupancy of the building. The department covenants to include the lease payment in its annual budget proposal to the governor, and interest on the bonds is capitalized until June 30, 1993.
Long-term credit prospects remain positive as California continues to grow and to possess large resources. However, tax collections to date in fiscal 1992 are very disappointing, derailing the state's plan to balance the current budget and erase the accumulated deficit. Despite the major actions taken earlier this year, a sizable budget deficit is now projected for this year and next. The governor has recommended nearly $1 billion in expenditure cuts and asked that the legislature meet in special session; the regular session begins on Jan. 6. The revenue shortfall results from deeper and longer recessionary declines than expected. Growth has slowed considerably, and the state reports that job loss has been many times greater than previously thought.
/CONTACT: Amy S. Doppelt, 212-908-0514, or Claire G. Cohen, 212-908-0552, both of Fitch/ CO: State Public Works Board of the State of California ST: California IN: SU: RTG SM -- NY015 -- 2288 12/13/91 10:14 EST