Printer Friendly

MONTANA BOARD OF INVESTMENTS PAYROLL TAX BONDS 'A+/F-1+' BY FITCH -- FITCH FINANCIAL WIRE --

 NEW YORK, Aug. 27 /PRNewswire/ -- The Board of Investments of the State of Montana's $45 million variable rate payroll tax bonds (workers' compensation program) series 1993 are rated 'A+/F-1+' by Fitch. The bonds will be sold through negotiation by Piper Jaffray Inc. and D.A. Davidson & Co. during the week of Sept. 7. The $138 million parity fixed-rate series 1991 bonds are raised to 'A+' from 'A'.
 This sale is the Board of Investments' second issuance to fund the liability in a portion of the state's workers' compensation program. The bond proceeds will be used to pay claims based on injuries occurring prior to July 1, 1990, with claims based on more recent events being funded on an actuarially sound basis under a separately financed program. The bond proceeds, along with those from a 1991 sale, are expected to be nearly sufficient to pay remaining claims, although a small amount of additional debt or loans from another fund may be necessary in the future.
 Bonds are secured by a first lien on the payroll tax, which can only be used for debt service and paying claims. The board is providing its own liquidity through a standby bond purchase agreement, and resources available to meet this obligation are vast. The payroll tax was revised and the rate increased recently. It now consists of three parts; a tax on an employers' total payroll, a tax on employees' total earnings, and a tax on self-employed persons' earnings. The tax is broad based, covering nearly all employment except the federal government, interstate railroad workers, and Native Americans working on Indian reservations. Federal employees, however, are subject to the employees portion of the tax. The types of compensation taxed also are broad, including salary, commissions, bonuses, profit-sharing distributions, tips, and in-kind payments. Historical payroll data has shown remarkable stability, declining only minimally in one year since 1958. Over the 1958-1992 period, annual employment declined on five occasions. The state's payroll base is relatively diverse, with services and trade making up 42 percent of total compensation. Economically sensitive sectors, such as mining, construction, and manufacturing, currently represents 3 percent, 5 percent, and 9 percent of total payroll, respectively. Montana's Department of Revenue, which collects the state's income tax, now collects the payroll tax, and delinquencies are very low.
 As a result of the recent payroll tax changes, debt service coverage increases substantially. Even assuming no growth in the payroll tax, maximum annual debt service after this issue will be covered at least 2.4x through fiscal 2007, and 1.9x thereafter when the employers tax rate declines.
 -0- 8/27/93
 /CONTACT: Amy S. Doppelt of Fitch, 212-908-0514/


CO: ST: Montana IN: SU: RTG

SH -- NY042 -- 6679 08/27/93 14:23 EDT
COPYRIGHT 1993 PR Newswire Association LLC
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Publication:PR Newswire
Date:Aug 27, 1993
Words:458
Previous Article:DUFF & PHELPS: RECENT INNOVATIONS IN AUTOMOBILE LEASE-BACKED SECURITIES
Next Article:PRUDENTIAL HOME $188.1 MILLION MORTGAGE CERTIFICATES 1993-37 'AA' BY FITCH -- FITCH FINANCIAL WIRE --

Terms of use | Copyright © 2016 Farlex, Inc. | Feedback | For webmasters